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Politics in Wage setting: Does government colour matter?

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  • Kåre Johansen

    ()
    (Department of Economics, Norwegian University of Science and Technology)

  • Ørjan Mydland
  • Bjarne Strøm

    ()
    (Department of Economics, Norwegian University of Science and Technology)

Abstract

This paper studies the relationship between wage formation and the political colour of the government in an economy with centralized wage bargaining. Ideological, organizational and personal ties between the central trade union and the social democratic political party suggest that the trade union may behave significantly different in wage negotiations under a social democratic than under a conservative government. Using time series data for Norway, we estimate that changing from a conservative to a social democratic central government significantly reduces manufacturing wages and makes wages more responsive to unemployment. This result is consistent with a wage bargaining model augmented by political preferences of the union leaders and suggests that the effect of bargaining coordination depends on the political colour of the government. The estimated effects are both robust with respect to model specification and stable over time.

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File URL: http://www.svt.ntnu.no/iso/WP/2006/1300106Politicsandwages.pdf
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Bibliographic Info

Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 6506.

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Length: 28 pages
Date of creation: 31 Jan 2006
Date of revision:
Handle: RePEc:nst:samfok:6506

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Keywords: Wages; political regime; time series analysis;

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References

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  1. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
  2. Barkbu,B.B. & Nymoen,R. & Roed,K., 2001. "Wage coordination and unemployment dynamics in Norway and Sweden," Memorandum 11/2001, Oslo University, Department of Economics.
  3. Nymoen, Ragnar, 1989. "Modelling Wages in the Small Open Economy: An Error-Correction Model of Norwegian Manufacturing Wages," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 239-58, August.
  4. Johansen, Kare, 1995. "Norwegian Wage Curves," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(2), pages 229-47, May.
  5. Beck, Nathaniel & Katz, Jonathan N. & Alvarez, Michael R. & Garrett, Geoffrey & Lange, Peter, 1993. "Government Partisanship, Labor Organization and Macroeconomic Performance: A Corrigendum," Working Papers 848, California Institute of Technology, Division of the Humanities and Social Sciences.
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  7. McCallum, John, 1983. "Inflation and Social Consensus in the Seventies," Economic Journal, Royal Economic Society, vol. 93(372), pages 784-805, December.
  8. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
  9. Hibbs, Douglas Jr., 1992. "Partisan theory after fifteen years," European Journal of Political Economy, Elsevier, vol. 8(3), pages 361-373, October.
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  12. Johansen, Kare & Strom, Bjarne, 1997. "Wages, Prices and Politics: Evidence from Norway," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 511-22, November.
  13. Fabio Padovano & Emma Galli, 2003. "Corporatism, policies and growth," Economics of Governance, Springer, vol. 4(3), pages 245-260, November.
  14. Luca Nunziata, 2002. "Unemployment, Labour Market Institutions and Shocks," Economics Papers 2002-W16, Economics Group, Nuffield College, University of Oxford.
  15. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
  16. Hibbs, Douglas A, Jr & Locking, Hakan, 2000. "Wage Dispersion and Productive Efficiency: Evidence for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 755-82, October.
  17. Nymoen, R, 1991. "A Small Linear Model of Wage- and Price-Inflation in the Norwegian Economy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(3), pages 255-69, July-Sept.
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Citations

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Cited by:
  1. Potrafke, Niklas, 2009. "Political cycles and economic performance in OECD countries: empirical evidence from 1951-2006," MPRA Paper 23751, University Library of Munich, Germany.
  2. Potrafke, Niklas, 2010. "The growth of public health expenditures in OECD countries: Do government ideology and electoral motives matter?," Munich Reprints in Economics 19280, University of Munich, Department of Economics.
  3. Niklas Potrafke, 2011. "Does government ideology influence budget composition? Empirical evidence from OECD countries," Economics of Governance, Springer, vol. 12(2), pages 101-134, June.
  4. Christian Bj�rnskov & Niklas Potrafke, 2012. "Political Ideology and Economic Freedom Across Canadian Provinces," Eastern Economic Journal, Palgrave Macmillan, vol. 38(2), pages 143-166.
  5. Niklas Potrafke, 2010. "Ideology and cultural policy," TWI Research Paper Series 49, Thurgauer Wirtschaftsinstitut, Universität Konstanz.

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