Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2002:12: Wage policy and endogenous wage rigidity: a representative view from the inside

Jonas Agell () and Helge Bennmarker ()
Additional contact information
Jonas Agell: IFAU - Insitute for Labour Market Policy Evaluation, Postal: Labour Market Policy Evaluation, P O Box 513, SE-751 20 Uppsala, Sweden
Helge Bennmarker: IFAU - Insitute for Labour Market Policy Evaluation, Postal: Labour Market Policy Evaluation, P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: We report the results from a representative survey of human resource managers in 885 Swedish firms. We estimate that during the severe recession of the 1990s, only 1.1 percent of workers took a cut in regular nominal pay. We trace the lack of wage moderation to a combination of exogenous (primarily labor law and collective bargaining contracts) and endogenous factors. Our analysis suggests that (i) endogenous wage rigidity plays an important role in most segments of the labor market, (ii) sources of endogenous wage rigidity differ significantly between the high- and low-end of the labor market, and between large and small firms, and (iii) mechanisms of wage rigidity tend to complement each other. Some of our questions deal with issues in the economics of personnel. We report evidence that job protection tends to reinforce the stigma from long-term unemployment, and that labor market training tends to reduce the same stigma. We show that managers in small organizations have a more negative attitude towards incentive schemes based on relative rewards, and we report evidence suggesting that gender have an impact on attitudes concerning effort and motivation.

Keywords: Wage rigidity; survey evidence; effort models; motivation; labor law; long-term unemployment; gender and pay

JEL-codes: C81; E24; J30; J50

83 pages, August 20, 2002

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