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Dimensions of the Wage-Unemployment Relationship in the Nordic Countries: Wage Flexibility without Wage Curves

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Author Info
Karsten Albæk (Institute of Economics, University of Copenhagen)
Rita Asplund (The Research Institute of the Finnish Economy, Helsinki)
Stig Blomskog (University College of South Stockholm)
Erling Barth (Institute for Social Research, Oslo)
Björn Rúnar Guðmundsson (Ministry of Finance, Iceland)
Vifill Karlsson (The Icelandic University College of Business Administration)
Erik Strøjer Madsen (Aarhus Business School)

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Abstract

This paper analyses wage formation in the Nordic countries at the regional level by the use of micro-data. Our results deviate systematically from the main conclusions drawn by Blanchflower and Oswald (1994). We find no stable negative relation between wages and unemployment across regions in the Nordic labor markets once regional fixed effects are accounted for. Wage formation at the regional level is characterized by considerable persistence, but unemployment exerts no immediate influence on wages at the regional level. There is no evidence of a wage curve, nor of a Phillips curve, at the regional level in the Nordic countries. The results are consistent with a theoretical model where central bargaining agents determine a national wage increment, and local bargaining agents determine wage drift.

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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 99-24.

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Length: 50 pages
Date of creation: Nov 1999
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Handle: RePEc:kud:kuiedp:9924

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Related research
Keywords: wage curve; Phillips curve; regional unemployment and wages;

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Find related papers by JEL classification:
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Raaum, O. & Wulfsberg, F., 1995. "Unemployment, Labour Market Programmes and Wages in Norway," Memorandum 24/1995, Oslo University, Department of Economics.
  2. Holden, S., 1998. "Wage Drift and the Relevance of Centralised Wage Setting," Memorandum 04/1998, Oslo University, Department of Economics.
    Other versions:
  3. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Martin Browning & Lars Peter Hansen & James J. Heckman, 1999. "Micro Data and General Equilibrium Models," Discussion Papers 99-10, University of Copenhagen. Department of Economics.
    Other versions:
  5. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August. [Downloadable!] (restricted)
  6. Longva, P. & Raaum, O., 1998. "Unemployment and Relative Earnings of Immigrants," Memorandum 02/1998, Oslo University, Department of Economics.
  7. Rodseth,A. & Nymoen,R., 1999. "Nordic wage formation and unemployment seven years later," Memorandum 10/1999, Oslo University, Department of Economics. [Downloadable!]
  8. repec:fth:prinin:343 is not listed on IDEAS
  9. Moene, Karl O, 1988. "Unions' Threats and Wage Determination," Economic Journal, Royal Economic Society, vol. 98(391), pages 471-83, June. [Downloadable!] (restricted)
  10. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
  11. Layard, R. & Nickell, S., . "Layard-Nickell," Instructional Stata datasets for econometrics layardnickell, Boston College Department of Economics. [Downloadable!]
  12. Blanchard, Olivier & Katz, Lawrence F, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter. [Downloadable!] (restricted)
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  13. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June. [Downloadable!] (restricted)
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  14. Johansen, Kare, 1997. "The Wage Curve: Convexity, Kinks and Composition Effects," Applied Economics, Taylor and Francis Journals, vol. 29(1), pages 71-78, January. [Downloadable!] (restricted)
  15. Edin, P.A. & Holmlund, B. & Ostros, T., 1992. "Wage Behavior and Labor Market Programs in Sweden: Evidence from Micro Data," Papers 1993-1, Uppsala - Working Paper Series.
  16. Blanchflower, David G & Oswald, Andrew J, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-67, Summer. [Downloadable!] (restricted)
  17. Barro, Robert J, 1988. "The Persistence of Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 32-37, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Barth, Erling & Bratsberg, Bernt & Raaum, Oddbjørn, 2003. "Local Unemployment and the Earnings Assimilation of Immigrants in Norway," Memorandum 19/2002, Oslo University, Department of Economics. [Downloadable!]
  2. Sari Pekkala, 2003. "What Draws People to Urban Growth Centers: Jobs vs. Pay?," Discussion Papers 310, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  3. Morten Marott Larsen, 2003. "Regional wage differentials - does distance matter?," ERSA conference papers ersa03p418, European Regional Science Association. [Downloadable!]
  4. Sari Pekkala, 2003. "Is Little Brother Nothing but Trouble?: Educational Attainment, Returns to Schooling and Sibling Structure," Discussion Papers 302, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  5. Barth, Erling & Bratsberg, Bernt & Naylor, Robin A. & Raaum, Oddbjørn, 2002. "Explaining Variations in Wage Curves: Theory and Evidence," Memorandum 03/2002, Oslo University, Department of Economics. [Downloadable!]
  6. Pablo García & Paulina Granados, 2005. "The Wage Curve in Chile," Working Papers Central Bank of Chile 320, Central Bank of Chile. [Downloadable!]
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