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Long-Run Relations between Private and Public Sector Wages in Sweden

  • Jacobson, Tor
  • Ohlsson, Henry

Using a maximum likelihood cointegration approach, we find two long-run relationships between central government, local government, and private sector wages in Sweden. This means that there is one common trend for the three sectoral wages. Private sector wages are weakly exogenous for the estimation of the long-run relationships. This suggests that the private sector is the wage leader. Testing linear restrictions on the estimated cointegrating space, we reject stationarity for the three relative wages using likelihood ratio-tests. The hypotheses of homogeneity for the two cointegrating vectors, i.e., that wages do not diverge in the long run, is also rejected.

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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 19 (1994)
Issue (Month): 3 ()
Pages: 343-60

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Handle: RePEc:spr:empeco:v:19:y:1994:i:3:p:343-60
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  1. Kunst, Robert & Neusser, Klaus, 1990. "Cointegration in a Macroeconomic System," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(4), pages 351-65, Oct.-Dec..
  2. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc.
  3. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
  4. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  5. Hylleberg, S. & Engle, R. F. & Granger, C. W. J. & Yoo, B. S., 1990. "Seasonal integration and cointegration," Journal of Econometrics, Elsevier, vol. 44(1-2), pages 215-238.
  6. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  7. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  8. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  9. Holmlund, B. & Ohlsson, H., 1990. "Wage Linkages Between Private and Public Sectors," Papers 1990t, Uppsala - Working Paper Series.
  10. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  11. Hirotugu Akaike, 1969. "Fitting autoregressive models for prediction," Annals of the Institute of Statistical Mathematics, Springer, vol. 21(1), pages 243-247, December.
  12. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  13. 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.
  14. Muscatelli, Vito Antonio & Hurn, A Stan, 1992. " Cointegration and Dynamic Time Series Models," Journal of Economic Surveys, Wiley Blackwell, vol. 6(1), pages 1-43.
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