Working Paper Series, Uppsala Center for Labor Studies, Department of Economics, Uppsala University
Wage and Employment Determination in Volatile Times: Sweden 1913–1939
Abstract: The paper studies wage and employment determination in the
Swedish business sector from the mid-1910s to the late 1930s. This period
includes the boom and bust cycle of the early 1920s as well as the Great
Depression of the early 1930s. The events of the early 1920s are
particularly intriguing, involving inflation running at an annual rate of
30 percent followed by a period of sharp deflation where nominal wages and
prices fell by 30 percent and unemployment increased from 5 to 30 percent.
We examine whether relatively standard wage and employment equations can
account for the volatile economic development during the interwar years. By
and large, the answer is a qualified yes. Industry wages were responsive to
industry-specific firm performance, suggesting a significant role for
“insider forces” in wage determination. Unemployment had a strong downward
impact on wages. There is evidence that reductions in working time added to
wage pressure; yet estimates of labor demand equations suggest that cuts in
working time may have slightly increased employment as firms substituted
workers for hours.
Keywords: Wage determination; labor demand; interwar labor markets; (follow links to similar papers)
JEL-Codes: J23; J31; N14; N34; (follow links to similar papers)
43 pages, April 18, 2012
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