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Wage Dispersion and Productive Efficiency: Evidence for Sweden

  • Hibbs, Douglas A, Jr
  • Locking, Hakan

The Swedish record of enormous compression of relative wages under centralized "solidarity" bargaining, followed by substantial decompression of wages after central bargaining broke down, supplies observations well suited to empirical evaluation of arguments about the response of productive efficiency to shifts in wage distribution. We obtain no results supporting "fairness, morale, and cohesiveness" theories implying that wage leveling within workplaces and industries may enhance productivity. Reduction of interindustry wage differentials evidently did, however, contribute positively to aggregate output and productivity growth, most likely for the structural reasons first emphasized by Swedish trade union economists almost a half century ago. Copyright 2000 by University of Chicago Press.

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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 18 (2000)
Issue (Month): 4 (October)
Pages: 755-82

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Handle: RePEc:ucp:jlabec:v:18:y:2000:i:4:p:755-82
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  1. Agell, Jonas & Lundborg, Per, 1995. " Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 295-307, June.
  2. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
  3. 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.
  4. Addison, John T & Hirsch, Barry T, 1989. "Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived?," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 72-105, January.
  5. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
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  7. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, December.
  8. Edin, Per-Anders & Zetterberg, Johnny, 1992. "Interindustry Wage Differentials: Evidence from Sweden and a Comparison with the United States," American Economic Review, American Economic Association, vol. 82(5), pages 1341-49, December.
  9. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399, October.
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  11. Per-Anders Edin & Bertl Holmlund, 1993. "The Swedish Wage Stucture: The Rise and Fall of Solidarity Wage Policy?," NBER Working Papers 4257, National Bureau of Economic Research, Inc.
  12. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
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  14. Pehkonen, Jaakko, 1995. "Wages and productivity growth in the Nordic countries," European Economic Review, Elsevier, vol. 39(6), pages 1181-1196, June.
  15. Lundberg, Erik, 1985. "The Rise and Fall of the Swedish Model," Journal of Economic Literature, American Economic Association, vol. 23(1), pages 1-36, March.
  16. Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 44-49, May.
  17. Levine, David I, 1992. "Can Wage Increases Pay for Themselves? Tests with a Production Function," Economic Journal, Royal Economic Society, vol. 102(414), pages 1102-15, September.
  18. Flam, Harry, 1987. " Equal Pay for Unequal Work," Scandinavian Journal of Economics, Wiley Blackwell, vol. 89(4), pages 435-50.
  19. Lindbeck, A., 1983. "Interpreting income distributions in a welfare state : The case of Sweden," European Economic Review, Elsevier, vol. 22(2), pages 227-256, July.
  20. Agell, Jonas & Lommerud, Kjell Erik, 1993. " Egalitarianism and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 559-79, December.
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