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Wage Flexibility in a Unionized Economy with Stable Wage Dispersion

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  • Häkkinen Skans, Iida

    () (National Institute of Economic Research)

  • Carlsson, Mikael

    () (Uppsala Center for Labor Studies (UCLS) and the Riksbank)

  • Nordström Skans, Oskar

    () (Uppsala University, UCLS and IZA)

Abstract

The paper estimates how wages respond to changes in regional unemployment using detailed Swedish micro data. The study is set in an economy with close to complete union coverage where real wages have grown continuously in all parts of the wage distribution for 15 years, and where the aggregate wage dispersion has remained con-stant for the same period. Our results show that this aggregate stability is coupled with non-trivial flexibility in terms of wage adjustments to changes in regional unemploy-ment. These results are particularly strong after the data have been purged from com-positional fluctuations. However, we also document that the industries with least flex-ible collective agreements cover a higher-than-average share of workers with a high risk of job-loss into unemployment. This institutional feature leads to additional wage rigidities for vulnerable workers.

Suggested Citation

  • Häkkinen Skans, Iida & Carlsson, Mikael & Nordström Skans, Oskar, 2017. "Wage Flexibility in a Unionized Economy with Stable Wage Dispersion," Working Papers 149, National Institute of Economic Research.
  • Handle: RePEc:hhs:nierwp:0149
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    References listed on IDEAS

    as
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    2. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 1-25.
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    10. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
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