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

Author

Listed:
  • Forslund, Anders

    (Department of Economics)

  • Lindh, Thomas

    (Department of Economics)

Abstract

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.

Suggested Citation

  • Forslund, Anders & Lindh, Thomas, 1997. "Bargaining, Capital Formation and Unemployment: A Putty-Clay Approach," Working Paper Series 1997:18, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:1997_018
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    Cited by:

    1. Gerard J. van den Berg, 2003. "Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1337-1357, November.

    More about this item

    Keywords

    Unemployment; bargaining institutions; putty-clay production;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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