Working Papers, Department of Economics, Lund University
Wage Formation and the Relation between Real Wages and Unemployment in Sweden
Abstract: This paper examines the determinants of the wage level and
the relation between the wage level and unemployment in Sweden between 1982
and 2002, using a cointegrated VAR approach. The long-run relation between
wages and unemployment is found to be negative. There is also evidence of
large deviations between the development in real wages and the development
in productivity, in that the growth in real wages exceeds the growth in
labour productivity. The results indicate that rigidities are present in
the Swedish labour market and that these rigidities may cause higher
unemployment. Furthermore, trade unions are found to have a large influence
on the wage formation process.
Keywords: Wage formation; Unemployment; Cointegration; Common Trends; (follow links to similar papers)
JEL-Codes: C32; E24; (follow links to similar papers)
44 pages, December 21, 2005
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