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Interpreting Wage Bargaining Norms

Author

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  • Vartiainen, Juhana

    () (National Institute of Economic Research)

Abstract

From the mid-1990s onwards, Swedish wage bargaining has been characterised by informal co-ordination of the wage claims of big unions and bargaining cartels. In particular, it has been understood that the manufacturing sector should lead by first agreeing on a pay increase, whereafter the service sector and public sector unions choose a similar increase. We analyse his setup with two possible theoretical interpretations: (i) the manufacturing sector as a tackelberg leader and (ii) a normative role for the manufacturing sector’s pay increase, upported either by unmodelled social pressure or a modeled loss aversion (envy) of the heltered sector unions. The conclusion of the analysis is that the normative or leading role of one sector – in the Swedish case the manufacturing sector – can potentially bring big benefits for employment and output. Generalising an idea suggested by Lars Calmfors and Anna Larsson, our analysis also generates a rudimentary theory of why the wage increase norm sometimes binds and sometimes not. A comparison of the model predictions and the observed outcomes of the last five wage bargaining rounds in Sweden suggests that the model is generally consistent with the empirical observations: wage moderation and norm observance are stronger when the manufacturing industry’s initial relative wage is low.

Suggested Citation

  • Vartiainen, Juhana, 2010. "Interpreting Wage Bargaining Norms," Working Papers 116, National Institute of Economic Research.
    • Handle: RePEc:hhs:nierwp:0116
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    References listed on IDEAS

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    1. Gren, Ing-Marie, 2003. "Monetary Green Accounting and Ecosystem Services," Working Papers 86, National Institute of Economic Research.
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    4. Öller, Lars-Erik & Barot, Bharat, 1999. "Comparing the Accuracy of European GDP Forecasts," Working Papers 64, National Institute of Economic Research.
    5. Sofia Ahlroth & Anders Björklund & Anders Forslund, 1997. "The Output Of The Swedish Education Sector," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(1), pages 89-104, March.
    6. Huhtala, Anni & Samakovlis, Eva, 2003. "Green Accounting, Air Pollution and Health," Working Papers 82, National Institute of Economic Research.
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    Cited by:

    1. Lars Calmfors & Anna Larsson Seim, 2013. "Pattern Bargaining and Wage Leadership in a Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(1), pages 109-140, January.

    More about this item

    Keywords

    wage bargaining; bargaining co-ordination;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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