Wage Flexibility in a Unionized Economy with Stable Wage Dispersion

28 Pages Posted: 28 Jan 2019

See all articles by Mikael Carlsson

Mikael Carlsson

Sveriges Riksbank - Research Department; Sveriges Riksbank

Iida Häkkinen Skans

National Institute of Economic Research (NIER)

Oskar Nordstrom Skans

IFAU - Office of Labour Market Policy Evaluation; IZA Institute of Labor Economics

Abstract

The paper estimates how wages respond to changes in regional unemployment using detailed Swedish micro data. The study is set in an economy with close to complete union coverage where real wages have grown continuously in all parts of the wage distribution for the past 15 years, and where the aggregate wage dispersion has remained constant for the same period. Our results show that this aggregate stability is coupled with non-trivial flexibility in terms of wage adjustments to changes in regional unemployment. Accounting for the fluctuations in composition of the employees is important for the estimated elasticity of wages. Wage adjustments are larger for employees with high unemployment risk and for new hires entering from unemployment.

Keywords: wages, unemployment, unions, wage flexibility

JEL Classification: J5, J3

Suggested Citation

Carlsson, Mikael and Häkkinen Skans, Iida and Nordstrom Skans, Oskar, Wage Flexibility in a Unionized Economy with Stable Wage Dispersion. IZA Discussion Paper No. 12093. Available at SSRN: https://ssrn.com/abstract=3323208

Mikael Carlsson (Contact Author)

Sveriges Riksbank - Research Department ( email )

S-103 37 Stockholm
Sweden

HOME PAGE: http://www.riksbank.com/research/carlsson

Sveriges Riksbank ( email )

Brunkebergstorg 11
SE-103 37 Stockholm
Sweden

Iida Häkkinen Skans

National Institute of Economic Research (NIER) ( email )

Kungsgatan 12-14. Box 3116
Stockholm, 10362
Sweden

Oskar Nordstrom Skans

IFAU - Office of Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden
+46 18 471 70 79 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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