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Bargaining, Capital Formation and Unemployment: A Putty-Clay Approach

Listed author(s):
  • Forslund, Anders


    (Department of Economics)

  • Lindh, Thomas


    (Department of Economics)

Swedish unemployment was very low up to the early 1990s when it rose rapidly. Theoretically, decentralisation of wage bargaining in the 1980s might have allowed low-productivity firms to survive or increased wage mark-ups, making employment more sensitive to shocks. In Swedish plant-level data for manufacturing 1968-1992 relatively less employment is in low-productivity plants after decentralisation than before, but a positive correlation emerges between industry wage costs and productivity. A putty-clay model with bargaining explains a puzzling desynchronisation between real wage and productivity growth and indicates the decentralisation might have increased the wage mark-up.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1997:18.

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Length: 29 pages
Date of creation: 29 Aug 1997
Handle: RePEc:hhs:uunewp:1997_018
Contact details of provider: Postal:
Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden

Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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