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Bargaining, Capital Formation and Unemployment: A Putty-Clay Approach


Author Info

  • Forslund, Anders

    (Department of Economics)

  • Lindh, Thomas

    (Department of Economics)


Swedish unemployment was very low up to the early 1990s when it rose rapidly. Theoretically, decentralisation of wage bargaining in the 1980s might have allowed low-productivity firms to survive or increased wage mark-ups, making employment more sensitive to shocks. In Swedish plant-level data for manufacturing 1968-1992 relatively less employment is in low-productivity plants after decentralisation than before, but a positive correlation emerges between industry wage costs and productivity. A putty-clay model with bargaining explains a puzzling desynchronisation between real wage and productivity growth and indicates the decentralisation might have increased the wage mark-up.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1997:18.

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Length: 29 pages
Date of creation: 29 Aug 1997
Date of revision:
Handle: RePEc:hhs:uunewp:1997_018

Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Related research

Keywords: Unemployment; bargaining institutions; putty-clay production;

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Cited by:
  1. Gerard J. van den Berg, 1999. "Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies," Tinbergen Institute Discussion Papers 99-085/3, Tinbergen Institute.


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