Scandinavian Working Papers in Economics
Working Paper Series,
Uppsala University, Department of Economics
No 1997:18: Bargaining, Capital Formation and Unemployment: A Putty-Clay Approach
Anders Forslund () and Thomas Lindh ()
Additional contact information
Anders Forslund: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Thomas Lindh: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Abstract: Swedish unemployment was very low up to the early 1990s when it rose rapidly. Theoretically, decentralisation of wage bargaining in the 1980s might have allowed low-productivity firms to survive or increased wage mark-ups, making employment more sensitive to shocks. In Swedish plant-level data for manufacturing 1968-1992 relatively less employment is in low-productivity plants after decentralisation than before, but a positive correlation emerges between industry wage costs and productivity. A putty-clay model with bargaining explains a puzzling desynchronisation between real wage and productivity growth and indicates the decentralisation might have increased the wage mark-up.
Keywords: Unemployment; bargaining institutions; putty-clay production
29 pages, August 29, 1997
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