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Wage and Employment Determination in Volatile Times: Sweden 1913–1939

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  • Holmlund, Bertil

    ()
    (Department of Economics)

Abstract

The paper studies wage and employment determination in the Swedish business sector from the mid-1910s to the late 1930s. This period includes the boom and bust cycle of the early 1920s as well as the Great Depression of the early 1930s. The events of the early 1920s are particularly intriguing, involving inflation running at an annual rate of 30 percent followed by a period of sharp deflation where nominal wages and prices fell by 30 percent and unemployment increased from 5 to 30 percent. We examine whether relatively standard wage and employment equations can account for the volatile economic development during the interwar years. By and large, the answer is a qualified yes. Industry wages were responsive to industry-specific firm performance, suggesting a significant role for “insider forces” in wage determination. Unemployment had a strong downward impact on wages. There is evidence that reductions in working time added to wage pressure; yet estimates of labor demand equations suggest that cuts in working time may have slightly increased employment as firms substituted workers for hours.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2012:9.

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Length: 43 pages
Date of creation: 18 Apr 2012
Date of revision:
Handle: RePEc:hhs:uunewp:2012_009

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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
Email:
Web page: http://www.nek.uu.se/
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Keywords: Wage determination; labor demand; interwar labor markets;

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  1. Marimon, R. & Zilibotti, F., 1999. "Employment and Distributional Effects of Restricting Working Time," Economics Working Papers eco99/19, European University Institute.
  2. Jonung, Lars & Fregert, Klas, 2008. "Inflation Targeting Is a Success, So Far: 100 Years of Evidence from Swedish Wage Contracts," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(31), pages 1-25.
  3. Jonung, Lars & Wadensjo, Eskil, 1979. " Wages and Prices in Sweden, 1912-1921: A Retrospective Test," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(1), pages 60-71.
  4. Fregert, Klas, 2000. "The Great Depression in Sweden as a wage coordination failure," European Review of Economic History, Cambridge University Press, vol. 4(03), pages 341-360, December.
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  7. Jonung, Lars, 1979. "Knut wicksell's norm of price stabilization and Swedish monetary policy in the 1930's," Journal of Monetary Economics, Elsevier, vol. 5(4), pages 459-496, October.
  8. Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, vol. 35(5), pages 1009-1034, July.
  9. Skans, Oskar Nordstrom, 2004. "The impact of working-time reductions on actual hours and wages: evidence from Swedish register-data," Labour Economics, Elsevier, vol. 11(5), pages 647-665, October.
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  12. Johansen, Kare, 1996. "Insider Forces, Asymmetries, and Outsider Ineffectiveness: Empirical Evidence for Norwegian Industries 1966-87," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 89-104, January.
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  14. Calmfors, Lars & Forslund, Anders, 1991. "Real-Wage Determination and Labour Market Policies: The Swedish Experience," Economic Journal, Royal Economic Society, vol. 101(408), pages 1130-48, September.
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  16. Forslund, Anders, 1994. "Wage Setting at the Firm Level--Insider versus Outsider Forces," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 245-61, April.
  17. John Hassler & Petter Lundvik & Torsten Persson & Paul Soderlind, 1992. "The Swedish business cycle: stylized facts over 130 years," Discussion Paper / Institute for Empirical Macroeconomics 63, Federal Reserve Bank of Minneapolis.
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  19. Gunnar Bardsen & Jurgen A. Doornik & Jan Tore Klovland, 2010. "Wage Formation and Bargaining Power during the Great Depression," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(1), pages 211-233, 03.
  20. Anders Forslund & Nils Gottfries & Andreas Westermark, 2008. "Prices, Productivity and Wage Bargaining in Open Economies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 169-195, 03.
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