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Wage Drift and the Relevance of Centralised Wage Setting

  • Holden, Steinar

The system of wage setting in the Nordic countries is often regarded as highly centralised, contributing to considerable real wage flexibility. This view has been questioned, as sizeable wage drift may offset the effect of central negotiations. This paper presents evidence from the four major Nordic countries, suggesting that there is little or no such offsetting effect. Yet, at central negotiations, the institutional system of wage formation may induce nominal rigidities that may prevent wage restraint when there is little room for money wage growth. Empirical evidence supports the existence of nominal rigidity. Copyright 1998 by The editors of the Scandinavian Journal of Economics.

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 100 (1998)
Issue (Month): 4 (December)
Pages: 711-31

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Handle: RePEc:bla:scandj:v:100:y:1998:i:4:p:711-31
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  1. Hibbs, Douglas Jr. & Locking, Hakan, 1996. "Wage compression, wage drift and wage inflation in Sweden," Labour Economics, Elsevier, vol. 3(2), pages 109-141, September.
  2. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  3. Moene, K.O. & Wallerstein, M. & Hoel, M., 1992. "Bargaining Structure and Economic Performance," Memorandum 10/1992, Oslo University, Department of Economics.
  4. Peter Cramton & Joseph S. Tracy, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," Papers of Peter Cramton 92aer, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  5. Calmfors, Lars, 1993. "Lessons from the macroeconomic experience of Sweden," European Journal of Political Economy, Elsevier, vol. 9(1), pages 25-72, March.
  6. Steinar Holden, 1999. "Renegotiation and the Efficiency of Investments," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 106-119, Spring.
  7. Holden, Steinar, 1994. "Wage bargaining and nominal rigidities," European Economic Review, Elsevier, vol. 38(5), pages 1021-1039, May.
  8. Moene, Karl O, 1988. "Unions' Threats and Wage Determination," Economic Journal, Royal Economic Society, vol. 98(391), pages 471-83, June.
  9. Holden, S., 1989. "Wage Drift And Bargaining: Evidence From Norway," Papers 348, London School of Economics - Centre for Labour Economics.
  10. Holden, Steinar, 1988. " Local and Central Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(1), pages 93-99.
  11. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
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