Centralized Wage Setting and Labor Market Policies: the Nordic Model Case
AbstractIt is often argued that rigid labour market and centralized bargaining are harmful employment and growth. This paper looks at the case of Nordic countries as a counter-example pointing to some weaknesses of this view. Rigid labour markets, while reducing the offer oflow quality jobs, increase average labor productivity by favoring job relocation in high quality jobs. Moene and Wallerstein (1997) adopted a vintage-capital model to compare centralized and decentralized bargaining: they show that centralized bargaining systems yield higher labor productivity and higher structural unemployment. By introducing a frictional labor market in the vintage-capital framework,we show that the negative effects on employment characterizing centralized bargaining can be reduced by adopting active labor market policy.
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Bibliographic InfoPaper provided by Sapienza University of Rome, DISS in its series Working Papers with number 5/10.
Date of creation: Jan 2010
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Centralized wage setting; structural change; labor market policy; frictional unemployment;
Other versions of this item:
- Luca Zamparelli & Francesco Vona, 2010. "Centralized Wage Setting and Labor Market Policies: the Nordic Model Case," Working Papers CELEG 1005, Dipartimento di Economia e Finanza, LUISS Guido Carli.
- Vona, Francesco & Zamparelli, Luca, 2010. "Centralized wage setting and labor market policies: the nordic model case," MPRA Paper 21502, University Library of Munich, Germany.
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
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