Scandinavian Working Papers in Economics

Working Paper Series,
Trade Union Institute for Economic Research

No 154: Survey Evidence on Wage Rigidity: Sweden in the 1990s

Jonas Agell () and Per Lundborg
Additional contact information
Jonas Agell: Department of Economics, Uppsala University, Postal: Box 513, SE-751 20 Uppsala, Sweden
Per Lundborg: Trade Union Institute for Economic Research, Postal: FIEF, Wallingatan 38, SE-111 24 Stockholm, Sweden

Abstract: We present the results from a repeat survey on wage rigidity in a sample of 159 Swedish firms, conducted during a prolonged period of very high unemployment and very low inflation. We document the virtual absence of wage cuts, and trace this pervasive nominal rigidity to a set of interacting factors, including the legal status of the wage contract, the structure of bargaining institutions, and the design of social insurance. But employees’ concerns about fairness and relative wages also appear to play an important role. In addition, we report new results on underbidding, efficiency wage mechanisms, and unemployment persistence.

Keywords: Nominal wage rigidity; Panel data; Recession; Effort models; Unemployment persistence

JEL-codes: E24; J41; J63

31 pages, October 22, 1999

Note: This paper is a revised version of Working Paper 1999:2 of the Office of Labour Market Policy Evaluation, IFAU, and Working Paper 1999:12 of Department of Economics, Uppsala University.

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