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Wage Drift and the Relevance of Centralised Wage Setting

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  • Steinar Holden

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.

Suggested Citation

  • Steinar Holden, 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:711-731
    DOI: 10.1111/1467-9442.00132
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    JEL classification:

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

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