Scandinavian Working Papers in Economics

Working Paper Series,
Stockholm University, Swedish Institute for Social Research

No 6/2009: Distributional Effects of Wage Leadership: Evidence from Sweden

Per Lundborg ()
Additional contact information
Per Lundborg: Swedish Institute for Social Research, Stockholm University, Postal: SE-106 91 Stockholm, Sweden

Abstract: This paper represents the first analysis of the consequences of a formal wage leadership, the Swedish Industry Agreement. We show that leadership in general has implied a lowered wage level for occupational groups having signed the agreement compared to groups that have not signed it. This is as expected as wage leadership should stabilize wage increases. However, the effects differ widely across occupations and skilled groups that signed the agreement have raised their wage level compared to otherwise similar workers outside the agreement. The agreement seems to have had a less binding effect on skilled workers. A possible explanation is that local wage formation is more common among the skilled groups. The agreement has increased the wage level among high educated compared to low educated and thus raised the education premium. Difference-in-differences models are applied using register data 1990-2005.

Keywords: Wage leadership; Differences-in-differences.

JEL-codes: J31; J41; J51

23 pages, September 14, 2009

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