Interpreting Wage Bargaining Norms
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.
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| Length: | 39 pages |
| Date of creation: | 01 Feb 2010 |
| Handle: | RePEc:hhs:nierwp:0116 |
| Contact details of provider: | Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden Phone: 46-(0)8-453 59 00 Fax: 46-(0)8-453 59 80 Web page: http://www.konj.se/ Email: More information through EDIRC
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References listed on IDEAS
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