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Intersectoral Wage Linkages in Sweden

Author

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  • Friberg, Kent

    (Monetary Policy Department, Central Bank of Sweden)

Abstract

The purpose of this study is to investigate if the wage setting in certain sectors of the Swedish economy influences the wage setting in other sectors. The theoretical background is the Scandinavian model of inflation, which states that the wage setting in the sectors exposed to international competition should influence the wage setting in the sheltered sectors of the economy. The Johansen maximum likelihood cointegration approach is applied to quarterly data on Swedish sector wages for the period 1980:1–2002:2. Different vector error correction (VEC) models are created based on assumptions of which sectors are and which sectors are not exposed to international competition. The wage adaptability between sectors is then tested by imposing restrictions on the estimated VEC models. Finally, Granger causality tests are performed in the different restricted/unrestricted VEC models to test for sector wage leadership. The empirical results indicate large wage adaptability between manufacturing, construction, wholesale and retail trade, the central government sector and the municipalities and county councils sector. This is in line with the assumptions of the Scandinavian model. Furthermore, the empirical results indicate low wage adaptability between the financial sector and manufacturing, and between the financial sector and the two public sectors. The Granger causality tests provide strong evidence of the existence of intersectoral wage causality, but no evidence of a wage leading role in line with the assumptions of the Scandinavian model for any of the sectors.

Suggested Citation

  • Friberg, Kent, 2003. "Intersectoral Wage Linkages in Sweden," Working Paper Series 158, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0158
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    References listed on IDEAS

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    1. Jacobson, Tor & Ohlsson, Henry, 1994. "Long-Run Relations between Private and Public Sector Wages in Sweden," Empirical Economics, Springer, vol. 19(3), pages 343-360.
    2. Jurgen A. Doornik & Henrik Hansen, 2008. "An Omnibus Test for Univariate and Multivariate Normality," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(s1), pages 927-939, December.
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    6. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    7. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
    8. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
    9. Holmlund, B. & Ohlsson, H., 1990. "Wage Linkages Between Private and Public Sectors," Papers 1990t, Uppsala - Working Paper Series.
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    Cited by:

    1. J. Lindquist & Roger Vilhelmsson, 2006. "Is the Swedish central government a wage leader?," Applied Economics, Taylor & Francis Journals, vol. 38(14), pages 1617-1625.
    2. Cúrdia, Vasco & Finocchiaro, Daria, 2013. "Monetary regime change and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 37(4), pages 756-773.
    3. Lundborg, Per, 2009. "Distributional Effects of Wage Leadership: Evidence from Sweden," Working Paper Series 6/2009, Stockholm University, Swedish Institute for Social Research.
    4. Cúrdia, Vasco & Finocchiaro, Daria, 2005. "An Estimated DSGE Model for Sweden with a Monetary Regime Change," Seminar Papers 740, Stockholm University, Institute for International Economic Studies.
    5. DREGER, Christian & REIMERS, Hans-Eggert, 2011. "On The Role Of Sectoral And National Wage Components In The Wage Bargaining Process," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 11(1).
    6. Dreger, Christian & Reimers, Hans-Eggert, 2010. "On the Role of Sectoral and National Components in the Wage Bargaining Process," IZA Discussion Papers 4908, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Sector wage linkages; Wage leadership; Wage adaptability; Scandinavian model of inflation; Exposed and sheltered sectors; Vector error correction (VEC) models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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