Wage Dispersion and Country Price Levels

35 Pages Posted: 11 Jul 2000 Last revised: 5 Oct 2010

See all articles by Robert E. Lipsey

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Birgitta Swedenborg

Center for Business and Policy Studies (SNS), Stockholm

Date Written: May 1997

Abstract

The purpose of this paper was to investigate whether there is a relationship between the degree of wage dispersion in a country and its price level relative to other countries, compared in a common currency. It was found that once a country's real per capita income and deviations of its exchange rate from its trend value are allowed for, there is a pervasive relationship between wage dispersion and prices. Low wage dispersion, defined as a relatively small difference between the median wage and that of the lowest paid decile of workers, is associated with high price levels. The relationship applies more frequently to service prices than to goods prices, but where it does apply, the effects of wage dispersion are as large for goods as for services.

Suggested Citation

Lipsey, Robert E. and Swedenborg, Birgitta, Wage Dispersion and Country Price Levels (May 1997). NBER Working Paper No. w6039. Available at SSRN: https://ssrn.com/abstract=226449

Robert E. Lipsey (Contact Author)

National Bureau of Economic Research (NBER) at New York (Deceased)

Birgitta Swedenborg

Center for Business and Policy Studies (SNS), Stockholm ( email )

Skoldungagatan 2, Box 5629
S-114 86 Stockholm
Sweden

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