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Wage Drift and the Relevance of Centralised Wage Setting

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  • Holden, Steinar

Abstract

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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  • Holden, Steinar, 1998. " Wage Drift and the Relevance of Centralised Wage Setting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(4), pages 711-731, December.
  • Handle: RePEc:bla:scandj:v:100:y:1998:i:4:p:711-31
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. 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.
    3. Holden, Steinar, 1989. "Wage Drift and Bargaining: Evidence from Norway," Economica, London School of Economics and Political Science, vol. 56(224), pages 419-432, November.
    4. Calmfors, Lars, 1993. "Lessons from the macroeconomic experience of Sweden," European Journal of Political Economy, Elsevier, vol. 9(1), pages 25-72, March.
    5. Moene, K.O. & Wallerstein, M. & Hoel, M., 1992. "Bargaining Structure and Economic Performance," Memorandum 10/1992, Oslo University, Department of Economics.
    6. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
    7. Holden, Steinar, 1988. " Local and Central Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(1), pages 93-99.
    8. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    9. Steinar Holden, 1999. "Renegotiation and the Efficiency of Investments," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 106-119, Spring.
    10. Moene, Karl O, 1988. "Unions' Threats and Wage Determination," Economic Journal, Royal Economic Society, vol. 98(391), pages 471-483, June.
    11. Holden, Steinar, 1994. "Wage bargaining and nominal rigidities," European Economic Review, Elsevier, vol. 38(5), pages 1021-1039, May.
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    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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