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Wage Dispersion and Productive Efficiency: Evidence For Sweden

Author

Listed:
  • Hibbs Jr., Douglas A.

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Locking, Håkan

    (Department of Management and Economics, Växjö University)

Abstract

The effects of wage dispersion on productive efficiency is a topic rich in theoretical conjecture, a common object of Scandinavian polemical debate and at the same time an issue almost barren of systematic econometric evidence. The Swedish record of enormous compression of relative wages under the institutional regime of centralized solidarity bargaining, followed by substantial de-compression of wages after central bargaining broke down, supplies observations well suited for empirical testing of theories and assertions about the response of productive efficiency to shifts in wage distribution. Results presented in this paper obtained from regression experiments based on distribution-augmented production and labor productivity functions yield no support of 'fairness, morale and cohesiveness' theories implying that wage leveling within workplaces and industries may enhance productivity. We do find substantial evidence, however, that reduction of inter-industry wage differentials contributed positively to aggregate output and productivity growth, most likely for the structural reasons first emphasized by leading Swedish trade union economists almost a half century ago.

Suggested Citation

  • Hibbs Jr., Douglas A. & Locking, Håkan, 2000. "Wage Dispersion and Productive Efficiency: Evidence For Sweden," Working Papers in Economics 21, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0021
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    References listed on IDEAS

    as
    1. 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.
    2. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
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    4. Agell, Jonas & Lommerud, Kjell Erik, 1993. " Egalitarianism and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 559-579, December.
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    8. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters,in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc.
    9. Levine, David I, 1992. "Can Wage Increases Pay for Themselves? Tests with a Production Function," Economic Journal, Royal Economic Society, vol. 102(414), pages 1102-1115, September.
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    More about this item

    Keywords

    productivity; wages; distribution;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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