Download this Paper Open PDF in Browser

Wage-Setting Institutions as Industrial Policy

59 Pages Posted: 19 Apr 2000  

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER)

Magnus Henrekson

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2000

Abstract

Centralized wage-setting institutions compress relative wages. Motivated by this fact, we investigate the effects of centralized wage setting on the industry distribution of employment. We examine Sweden's industry distribution from 1960 to 1994 and compare it to the U.S. distribution over the same period. We also relate U.S.-Swedish differences in the industry distribution and their evolution over time to the structure of relative wages between and within industries. The empirical results identify the rise and fall of centralized wage-setting arrangements as a major factor in the evolution of Sweden's industry distribution. The compression associated with centralized wage-setting shifted the industry distribution of Swedish employment in three respects: away from industries with high wage dispersion among workers, away from industries with a high mean wage, and, most powerfully, away from industries with a low mean wage. By the middle 1980s, these wage structure effects accounted for about 40 percent of U.S.-Swedish differences in the industry distribution. The dissolution of Sweden's centralized wage-setting arrangements beginning in 1983 led to widening wage differentials and a reversal in the evolution of U.S.-Swedish differences in industry structure.

Suggested Citation

Davis, Steven J. and Henrekson, Magnus, Wage-Setting Institutions as Industrial Policy (January 2000). NBER Working Paper No. w7502. Available at SSRN: https://ssrn.com/abstract=218712

Steven J. Davis (Contact Author)

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7312 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Magnus Henrekson

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
Grevgatan 34
Stockholm, SE-10215
Sweden
+46-8-6654502 (Phone)
+46-8-6654599 (Fax)

HOME PAGE: http://www.ifn.se/mh

Paper statistics

Downloads
35
Abstract Views
1,037