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The Effect of Skill Mismatch on Wages in a small open Economy with Centralized Wage Setting: The Norwegian Case

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Abstract

Pervasive skill-biased technological changes, probably from trade in computer technology, have visualized the pros and cons of wage setting centralization in small open economies. Skill mismatch has increased in countries with wage rigidity. As a small open economy with centralized wage setting, Norway is a particularly interesting case. Indeed, this analysis shows that skill\mismatch has increased and is long-lived because of low focus on skill-specific imbalances in wage settlements. The conclusions are drawn on the basis of an econometric analysis of the determinants of wages to workers in five educational categories in Norwegian manufacturing. Furthermore, I estimate a 15 per cent drop in equilibrium wages to workers with higher university education after 1987, a period of recentralization of collective bargaining.

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 270.

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Date of creation: May 2000
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Handle: RePEc:ssb:dispap:270

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Keywords: Skill mismatch; wage flexibility; centralized wage setting; wage curve.;

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  1. Nickell, S. & Wadhwani, S., 1989. "Insider Forces And Wage Determination," Economics Series Working Papers 9972, University of Oxford, Department of Economics.
  2. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  3. Levy, Frank & Murnane, Richard J, 1996. "With What Skills Are Computers a Complement?," American Economic Review, American Economic Association, vol. 86(2), pages 258-62, May.
  4. Marco Manacorda & Barbara Petrongolo, 1996. "Skill Mismatch and Unemployment in OECD Countries," CEP Discussion Papers dp0307, Centre for Economic Performance, LSE.
  5. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 40-62, Spring.
  6. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1993. "A Comparison of Changes in the Structure of Wages," NBER Working Papers 4297, National Bureau of Economic Research, Inc.
  7. Lawrence F. Katz & Ana L. Revenga, 1990. "Changes in the Structure of Wages: The U.S. versus Japan," NBER Working Papers 3021, National Bureau of Economic Research, Inc.
  8. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1995. "A Comparison of Changes in the Structure of Wages in Four OECD Countries," NBER Chapters, in: Differences and Changes in Wage Structures, pages 25-66 National Bureau of Economic Research, Inc.
  9. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Jan, pages 49-98.
  10. Machin, Steve, 1994. "Changes in the Relative Demand for Skills in the UK Labour Market," CEPR Discussion Papers 952, C.E.P.R. Discussion Papers.
  11. 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.
  12. Machin, Stephen, 1996. "Wage Inequality in the UK," Oxford Review of Economic Policy, Oxford University Press, vol. 12(1), pages 47-64, Spring.
  13. Salvanes, K.G. & Forre, S.E., 1999. "Job Destruction, Heterogeneous Workers, Trade and Technical Change: Matched Worker/Plant Data Evidence from Norway," Papers 15/99, Norwegian School of Economics and Business Administration-.
  14. Kjersti-Gro Lindquist & Terje Skjerpen, 2000. "Explaining the change in skill structure of labour demand in Norwegian manufacturing," Discussion Papers 293, Research Department of Statistics Norway.
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