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Is the Swedish central government a wage leader?

  • J. Lindquist
  • Roger Vilhelmsson

Is the Swedish central government a wage leader? This question is studied empirically in a vector error-correction model using a unique, high quality data set. It is first shown that salaries of white-collar workers in the private sector and central government are cointegrated. It is then found that private sector salaries are weakly exogenous to the system of equations. This means that the private sector is the wage leader in the long-run model. It is also found that changes in central government salaries do not Granger cause changes in private sector salaries. Together, these findings clearly demonstrate that the central government is not placing undue pressure on salaries in the private sector. The central government is not acting as a wage leader.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840500407124
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 14 ()
Pages: 1617-1625

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Handle: RePEc:taf:applec:v:38:y:2006:i:14:p:1617-1625
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References listed on IDEAS
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  1. Latreille, Paul L & Manning, Neil, 2000. " Inter-industry and Inter-occupational Wage Spillovers in UK Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(1), pages 83-99, February.
  2. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
  3. Johansen, S., 1991. "Determination of Cointegration Rank in the Presence of a Linear Trend," Papers 76a, Helsinki - Department of Economics.
  4. Jacobson, Tor & Ohlsson, Henry, 1994. "Long-Run Relations between Private and Public Sector Wages in Sweden," Empirical Economics, Springer, vol. 19(3), pages 343-60.
  5. Wojciech W. Charemza & Derek F. Deadman, 1992. "New Directions In Econometric Practice," Books, Edward Elgar, number 84, March.
  6. Aukrust, Odd, 1970. "PRIM I: A Model of the Price and Income Distribution Mechanism of an Open Economy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 16(1), pages 51-78, March.
  7. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  8. Friberg, Kent, 2003. "Intersectoral Wage Linkages in Sweden," Working Paper Series 158, Sveriges Riksbank (Central Bank of Sweden).
  9. Holmlund, B. & Ohlsson, H., 1990. "Wage Linkages Between Private and Public Sectors," Papers 1990t, Uppsala - Working Paper Series.
  10. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
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