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Reprint of “The Scandinavian model—An interpretation”

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Abstract

The small open economies in Scandinavia have for long periods had high work effort, small wage differentials, high productivity, and a generous welfare state. To understand how this might be an economic and political equilibrium we combine models of collective wage bargaining, creative job destruction, and welfare spending. The two-tier system of wage bargaining provides microeconomic efficiency and wage compression. Combined with a vintage approach to the process of creative destruction we show how wage compression fuels investments, enhances average productivity and increases the mean wage by allocating more of the work force to the most modern activities. Finally, we show how the political support of welfare spending is fueled by both a higher mean wage and a lower wage dispersion.

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... Unions may also serve to alleviate agency problems in a similar way as performance pay schemes (Vroman 1990;Barth et al., 2012), improve efficiency by reducing sub-optimal excessive hiring of workers (Bauer and Lingens, 2013) or provide efficient effort levels within a framework of local bargaining (Barth et al., 2014). Unions can also induce employers to invest in training, and thereby increase the productivity of workers (Acemoglu and Pischke, 1999;Dustmann and Schönberg, 2009). ...
... Unions have a strong influence on wages and working conditions in Norway. According to the most recent study, which is based on the 2003 Norwegian Labour and Enterprise Survey, union density is around 55 percent among employees in non-state employers, and 87 percent are employed in workplaces with at least one union present (Barth et al., 2014). Seventy-nine percent of employees in non-state employers work for employers that are members of an employer"s association and 87 percent of employees work in firms that have collective agreements. ...
... Norway has strong coordination in wage bargaining, with both central bargaining at the national level and pattern bargaining at the sectoral level. Nevertheless, according to Barth et al., (2014) 78 percent of all employees work in plants with subsequent local bargaining, of which 80 percent of these local-bargaining-plants bargain over a host of topics, such as productivity agreements, downsizing, reorganization, on the job training, working hours and pensions in addition to pay. Collective agreements are settled at both the aggregate and at the workplace level. ...
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We exploit changes in tax subsidies for union members in Norway to identify the effects of changes in firm-level union density on productivity and wages. Increased deductions in taxable income for union members led to higher membership rates and contributed to a lower decline in union membership rates over time in Norway. Accounting for selection effects and the potential endogeneity of unionization, the results show that increasing union density at the firm level leads to a substantial increase in both productivity and wages. The wage effect is larger in more productive firms, consistent with rent-sharing models.
... Their conclusion is that the Nordic economies do not produce a more egalitarian distribution of material wealth than, for example, some horticultural and forager economies, although they show a higher level of intergenerational and social mobility. Barth et al. (2014Barth et al. ( , 2015 provide a theoretical overview of the main political and economic features of the Nordic open economies, summarizing and putting together results from previous economic research on the issue: Moene et al. (1993), Moene and Wallerstein (1997) and Barth et al. (2013). This research follows Barth et al. (2014) in representing the Nordic model as a set of three distinct but interconnected mechanisms. ...
... Barth et al. (2014Barth et al. ( , 2015 provide a theoretical overview of the main political and economic features of the Nordic open economies, summarizing and putting together results from previous economic research on the issue: Moene et al. (1993), Moene and Wallerstein (1997) and Barth et al. (2013). This research follows Barth et al. (2014) in representing the Nordic model as a set of three distinct but interconnected mechanisms. ...
... The second contribution of this study looks at another key element of the Scandinavian model framework analyzed in Barth et al. (2014): the political economy of public welfare spending. How did the oil bonanza affect the relative growth of welfare spending in Norway compared to the other Nordic countries? ...
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This paper aims at highlighting the effects of large natural resource endowments on the institutions of the so-called Scandinavian or Nordic model, through a comparative quantitative case study. Focusing on two key features of the Scandinavian model, namely (a) low income inequality and (b) high welfare spending, this study presents evidence on the shocks to these features for Norway after the country became one of the world’s largest oil exporters. A synthetic control unit constructed by weighting Nordic countries provides the most reliable comparison unit to estimate the comparative effects constituting the paper’s twofold contribution. First, the resource windfall did not contribute to significantly higher top income shares. Second, resource revenues contributed to finance the steadily increasing gap between Norway and other Nordic countries in the degree of welfare generosity.
... The welfare state, however, with its redistributive measures and service provision, is a political battleground of its own. Also, comprehensive welfare states interact with national labour markets by maintaining a competent and educated population, promoting stability and encouraging flexibility (Barth, Moene & Willumsen 2014). This gives social democrats a lot to play on when developing policies at the intersection of immigration and welfare policies: it is not only about the number of migrants and the national integration strategies, but also about the key role of the welfare state and the perceived operation of the labour market. ...
... Some observers argue that the welfare state itself is the problem: high benefits create perverse incentives and serve to discourage labour market participation among immigrants (and others with low-wage prospects). Others argue that the root of the problem is the wage setting mechanisms, which has led to a compressed wage structure with 'high low wages' (Barth, Moene & Willumsen 2014). When even the lowest wages are high, investing in technology is beneficial for companies, and jobs for low-skilled workers thus disappear at a higher rate in such systems than in contexts where workers with low productivity are paid low wages. ...
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An increasing concern in European politics is the potential tension between immigration and inclusive welfare states, suggesting that policy actors must choose one or the other. This is known as ‘the progressive dilemma’, which in Scandinavia becomes the social democratic dilemma. This article analyses how Scandinavian social democratic parties frame immigration and welfare policies to diffuse the dilemma in their party programs. Building on a review of the sociological, political and economic arguments underpinning the notion of a progressive dilemma, I undertake a qualitative analysis of the most recent party programs, as well as targeted documents on immigration, produced by the party organisations. Six social democratic and socialist parties in Norway, Sweden and Denmark are included. The analysis identifies a variety of ways to weave welfare state issues and immigration together. Abstracting from the empirical findings, I distil three key frames that dissolve the progressive dilemma, all drawing on established social democratic traditions: the social investment frame (the third way), the redistribution frame (Marxist tradition) and the social cohesion frame (social democrats as the voice of ‘ordinary people’).
... This applies particularly to employees who have a weak bargaining position or who are unaware of their rights. Thirdly, effective cooperation at the company level relies on the presence of a TU rep that can negotiate on behalf of the members at the workplace as well as employers who see the benefit of such cooperation (Nergaard et al., 2009;Barth et al., 2014;Barth & Nergaard, 2015). Previous studies in the private service sector have pointed to huge challenges when it comes to electing a TU rep at the workplace in industries such as hotels and restaurants and retail. ...
... One explanation can be that the model has not yet been fully institutionalized even in companies with collective agreements due to employees lacking the power to enforce arrangements for participation and cooperation at their workplace. As pointed out by several researchers, a prerequisite for effective cooperation at the company level is TU reps with the power to negotiate on behalf of the members at the workplace (Nergaard et al., 2009;Barth et al., 2014;Barth & Nergaard, 2015). TU reps with few members lack this power. ...
... Theoretically, unions might affect both job creation and job destruction. First, there is a rich theoretical literature linking how unions bargain for wages and how this affects innovation, job creation and destruction, and employment [13][14][15][16]. In this literature, local union bargaining stifles job creation and innovations, but also reduces job destruction and firm exit. ...
... Under so-called efficient bargaining [20], unions bargain for wages and employment. If unions influence effort, unions might induce efficient outcomes even under local bargaining [14]. Recently, Bryson and Dale-Olsen [21] find that local bargaining actually increases innovations in the UK and Norway. ...
Article
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We apply a shift-share approach and historical unionisation data from 1918 to study the impact of regional unionisation changes in Norway on regional wage and productivity growth, job-creation and -destruction and social security uptake during the period 2003–2012. As unionisation increases, wages grow. Lay-offs through plant closures and shrinking workplaces increase, causing higher retirement rates, while job creation, plant entry and other social security uptakes are unaffected. Productivity grows, partly by enhanced productivity among surviving and new firms and partly by less productive firms forced to close due to increased labour costs. Thus, unions promote creative destruction.
... The sudden appearance of the relatively large number of labour migrants in the Norwegian labour market, therefore, raised questions of the consequences for the Norwegian model of working life. In the Norwegian context, the security of employment through full-time permanent positions has traditionally been the basic element of the standard employment relation, built upon a power balance between organised labour and employers (Barth et al., 2014). Whilst worldwide the tendencies toward the use of non-standard employment have surged (ILO, 2016), Norway has maintained the principle of offering permanent employment to workers. ...
... As one of the informants suggested, the company stretched the law and did not offer a 100% contract even when the law dictated the rules explicitly 4 . Moreover, although labour unions are institutionalised in the Norwegian labour market (Barth et al., 2014) and present in the company, there was a low degree of collective organisation in the union among the migrant workers. On average, the interviewees considered the unions useless and were sceptical about the value of paying membership fees or reported being afraid of potential repercussions if they joined the union. ...
Article
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International migrant workers in European rural regions have supplied rural industries with necessary labour, stimulated the demography of host communities and raised questions about the inclusion of migrants. Using the case of Polish post-accession migrants employed in the farmed salmon industry in rural Norway, we explore the social consequences of changing employment relations in rural industries. By using a temporal perspective, we identify a transition from an inclusive employment regime experienced by the migrants who arrived in the locality within the first years after the EU enlargement in 2004, to an increasingly exploitative, insecure and competitive work environment for recently arrived migrants. We emphasise how employment conditions offered to different ‘waves’ of migrants affect the ways they perceive their status and value in rural hosting communities. Ultimately, we reflect on the potential long-term consequences of international migration to rural areas.
... The union movement in the Nordic countries has always been shaped by an ideal of equality, especially the demand for equal pay for equal work. Trade unions thus try to contribute to reducing wage inequality whenever they have an influence on the determination of wages (Barth et al, 2014). When wage negotiations are carried out at company level, the trade unions compress wages among the employees of each company. ...
... However, a strong welfare state implies that people's incomes are relatively well secured, also when people are temporarily without a job. Together with public funded retraining programs, lifelong learning, help to find job vacancies and so on, this makes people more willing to accept the pressure for constant restructuring -which in turn benefits society in the long run (Katzenstein, 1985, Rodrik, 1998Moene, 2014). This is yet another example of how equality and efficiency can go hand in hand and support each other. ...
Article
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We highlight and analyze an important channel for redistribution of income in the Nordic countries, often underemphasized in the scholarly literature that analyze the relationship between income equality and public health. We show how coordinated wage bargaining and solidaristic wage policy lead to wage compression, and thereby to low market income inequality in the Nordic countries. We also show that there are important spillovers between the distribution of wages decided in the labor market and the political support for a universal and comprehensive welfare state. Furthermore, we argue that small differences in income have not only contributed to good public health, but also to good economic performance in the Nordic countries.
... It is common to attribute the low inequality of the Scandinavian countries to a social democratic model. However, as emphasized by Barth, Moene and Willumsen (Barth, Moene et al. 2014) the social democratic road to affluence is not a story about a carefully planned development or an intelligent design more generally. Nor is it a story of "becoming rich first" and then distribute. ...
... Between 1921 and 1931 the number of strikes peaked in Norway, and as noted by Moene and Wallerstein (2003), at this time Norway and Sweden experienced the highest level of industrial conflicts in the world, and nowhere were employers as ready to respond to workers claims with lockouts as in Norway and Sweden. The process that changed this can be characterized as a combination of, on the one hand, the creation of complementarities between non-market institutions and capitalist dynamics, and on the other, political reinforcement (Barth et al. 2014, Barth et al. 2015, Barth and Moene 2016. The fundament was the a two-layer wage setting system that combined solidary, centralized bargaining with local negotiations. ...
Article
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Latin America experienced a process of reduction in income inequality between 2002 and 2014, a period in which most other countries experienced an increase. However, since then inequality has started to increase again. The Scandinavian countries are often regarded as models of low inequality, in spite of recent increases. If compared to Latin America, what stands out about Scandinavia is that one has managed to sustain processes of inequality reduction over several decades in spite of political shifts and changing economic conditions. This paper seeks to identify aspects of the interaction between structural factors, policy changes, and strengthening or weakening of change agents, that have led to sustained inequality reduction in the Scandinavian countries (with a particular emphasis on Norway), and discuss their relevance for Latin America.
... This institutional model has been characterised as a stable, institutional equilibrium with support across the political spectrum. Indeed, some argue that this equilibrium is of key importance to the economic success of the Scandinavian economies (Barth et al., 2014). 1 To what extent is labour mobility a threat to the institutional equilibrium in the labour market? While labour immigration can potentially have net positive, fiscal effects, the net benefit will be reduced/reversed if immigration has negative effects on well-functioning institutions in the receiving country (Borjas, 2015). ...
Article
Is labour mobility in the European Union a threat to the strength of unions? We argue that the combination of cheap labour, workforce heterogeneity and low unionisation among labour immigrants is a potential challenge for unions. The challenge will be severe if immigration affects natives’ unionisation. We use Norwegian administrative data in a natural experiment framework to examine this claim. The 2004 European Union expansion led to a rapid increase in labour migration to the building and construction industry, but licensing demands protected some workers from the labour supply shock. We show negative labour market effects for workers exposed to labour immigration, but no effect on union membership. Our results question theories of unionisation and are relevant for research on immigration, political behaviour and collective action.
... One reason for such small negative impacts of income on redistributive preferences is the possible influence of a positive counterweight to the traditional negative influence of economic self-interest. Specifically, Moene and Wallerstein (2001) and Barth et al. (2014) offer models of redistributive preferences recognizing that redistributive policies provide insurance against income loss. Assuming insurance is a normal good, then as income increases, demand for insurance, i.e. redistribution, increases. ...
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This paper tests whether effects of individual characteristics on redistributive preferences are constant across ideological subgroups. Using data from the U.S. General Social Surveys, we estimate ordered probit models for a full pooled sample, and liberal, moderate, and conservative subsamples. Wide cleavages in redistributive attitudes between liberals and conservatives, and between Democrats and Republicans are observed. Substantial gaps between Democrats and Republicans persist within ideological subgroups. Attitudinal differences across social classes exist for conservatives and moderates, but not liberals. Among moderates and conservatives, blacks are more likely than whites to support government redistribution. No black-white gap is observed among liberals. Though conservative women are more likely than conservative men to support major government involvement in redistribution, no gender gap emerges for liberals or moderates. Full sample results suggest that education has no discernible impact on redistributive attitudes, but subsample results strongly suggest that a college degree reinforces ideological effects.
... Furthermore, since labor and health markets in Scandinavia operate differently from the US, with e.g. national health care and flexicurity (Barth et al, 2014), and government interventions have funded schemes to keep workers employed, the overall economic consequences in the region have been borne more broadly by government spending and borrowing than by individuals; this may defer more costs to future years but has maintained considerable economic continuity in Primary (gr K-5) 3/11-4/15 3/16 -5/4** 3/12 -4/27 none Middle (gr 6-10) 3/11-5/18 3-16 -5/4** 3/12 -5/11 none Gymnasium (gr 11-13) 3/11-6/8 3/16 -5/4* 3/12 -5/11 3/17-6/15** Universities 3/11-6/22* 3/16 -5/4* 3/12 -6/15 3/17-6/15** Business restrictions: Health and Personal Care 3/13-4/15 3/16 -5/4* 3/12-4/27* independent Retailers 3/13 -5/11** 3/16 -5/25* , ** 3/12-4/27* , ** independent Restaurants 3/13-5/18** 3/16-5/25* , ** 3/12-5/11** independent^ Cultural activities 3/13-5/27 3/16 -5/4 3/12-6/15 independent *partial lifting **partial openings throughout *** App use banned June 15 citing privacy concerns ^ distancing regulations and liabilities changed in SE July 1, increasing requirements 7 The timeline in Figure 1 and dates summarized in Table 2 mark the periods during which the major restrictions and behavioral advice were announced and implemented by each country as the period between solid lines for each country (Denmark in red, Norway in gray, Iceland in blue, and Sweden in yellow). As is well known, Sweden has had the least direct economic interventions. ...
Article
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The Scandinavian countries of Denmark, Iceland, Norway and Sweden have approached the first months of the 2020 novel coronavirus pandemic with a range of economic and health policies that have resulted in disparate outcomes. Though similar in behavioral norms and institutions, Denmark, Iceland and Norway chose a precautionary approach that formally shut down schools and businesses to protect human health, while Sweden took a Business-As-Usual (BAU) approach aimed at maintaining normal economic and social activities. Iceland and Denmark have further invested in testing, tracking and containing the disease. Economic costs of the pandemic and government fiscal and monetary interventions to reduce their impacts have been dramatic and similar across countries, while Sweden has had the most severe loss of life. Using a panel from the four countries since the beginning of the pandemic, we calculate lives saved from stricter interventions by estimating cases and deaths as functions of behavior and government interventions with a bioeconomic model, then estimating the additional lives lost if these interventions did not occur. Comparison of the countries reveals three important lessons for both policies aimed at the pandemic and broader goals with high uncertainty levels: (1) the precautionary approach can be lowest cost, while still expensive; (2) detection and monitoring (e.g. testing and tracking) are integral to a successful precautionary approach; and (3) expecting tradeoffs between economic activity and health creates a false dichotomy-they are complements not substitutes. Pandemic policy should focus on minimizing expected costs and damages rather than attempting to exchange health and safety for economic well-being.
... Rather than focusing on a large set of countries as in Bengtsson and Waldenström (2018), we study the countries that rank as the most egalitarian with respect to pre-tax market income distribution, namely the Nordic countries (see Aaberge et al. (2018a), Barth et al. (2015) for an overview of the stylized facts describing these countries). ...
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As far as standard measures of income inequality are concerned, the Nordic countries rank among the most equal economies in the world. This paper studies whether and how this picture changes when the focus is on inequality of income composition, meaning the heterogeneity in individuals' factor income shares. We highlight the structural change taking place in all the Nordic countries since the early 1990s, with rising inequality in composition of individual incomes due mostly to a shift in capital incomes towards the top of the distribution.
... When catch limitations are combined with a continuous pressure to increase productivity, like all other industries, a steady reduction in employment in the sector must be expected. According to the Nordic model, this will cause redundant labor in the fisheries sector to be reallocated even when it involves migration [73]. ...
Article
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In several countries, maintaining the population of fisheries dependent communities are of major importance in the fisheries governance system. However, most studies investigating the relationship between fisheries and communities have a qualitative focus on the impact of fisheries policies on the communities. We have access to data on population and key employment indicators of every Norwegian municipality in addition to fisheries catch, landings and employment. These data allow us to study the effect of fisheries on population growth in fisheries dependent municipalities relative to all other municipalities. The data are analyzed using a multi-level approach integrating micro-and macrodata. The results indicate that general trends have a stronger influence on population growth than fisheries activities, implying that measures for increased fisheries landings are poor tools to support population growth.
... Economic theories suggest both a role of demand growth (Kaldor-Verdoorn effect), and of wage lead technological progress (Schumpeter (1942), Barth et al. (2014)) which may also be regime dependent, see e.g., Storm and Naastepad (2012, Ch. 3) and the references therein. ...
Article
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The specification of model equations for nominal wage setting has important implications for the properties of macroeconometric models that are used to aid economic policy decisions and as tools for forecasting. The modelling of the joint dependencies between wage and price adjustments , and their connections to variables like labour productivity and the rate of unemployment in the economy, is important for explaining inflation and for analyzing how it reacts to for example monetary policy stimulus during and after an economic crisis. Nominal wage rigidity is inherent in modern economies and since wage and price adjustments are imperfectly synchronized , real wage rigidity is an implication. The evolutions of nominal and real wages are therefore system properties that require multiple equation modelling. The importance of nominal wage setting was recognized by the producers of macroeconometric models from the beginning. The intellectual work laid down to resolve the several issues raised by the endogenization wages in macroeconometric models resulted in both the Phillips curve and the equilibrium correction model (later recognized as an implication of co-integrated variables more generally). The main models of wage and price formation are the Phillips Curve (PCM), the wage-price equilibrium correction model (WP-ECM) and the New Keynesian Phillips curve (NKPCM). Both the PCM and the WP-ECM originated in the second half of the 1950s. The PCM was adapted by the producers of macroeconometric models of the 1960s. The WP-ECM began to made its mark on the operational macroeconometric models during the late 1980s, but primarily in European * Thanks to the two anonymous reviewers for their comments. Thanks also to Eilev
... The 'Nordic model' has therefore been a point of fascination to scholars on the democratic left (e.g. Barth et al. 2015, Krugman 2015, Stiglitz 2015 and liberal political scientists such as Fukuyama (2011). ...
Article
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In one of the most influential contributions to modern political economy, Hall and Soskice have launched a distinction between ‘liberal’ and ‘coordinated’ market economies, placing the Nordic countries firmly in the latter category. We argue that, while the H&S distinction may serve classificatory purposes, seeing the Nordic model in terms of ‘coordinated capitalism’ blurs the distinctive features of the Nordic countries’ success as productive and fair economies. We contend that the central formula behind this success lies in what we call the Nordic model’s ambidexterity – the capacity to combine collaborative and competitive elements and skilfully navigate between them. Using an interdisciplinary perspective (inspired by organisation theory, cultural semiotics and evolutionary analysis), we provide a conceptual basis for reinterpreting the Nordic Model as an ambidextrous combination of culturally rooted, collaborative strategies that are subsequently competitively exposed. The article illustrates the workings of this ambidexterity in three societal domains: work life (including female participation), resource management – illustrated by the Norwegian petro-economy – and international business management and regulation with a focus on CSR. In each case we will show how collaboration is intertwined with pragmatic competitive exposure, yielding high productivity, high welfare, as well as fair income and wealth distribution.
... See alsoBraun (2011) andHaucap and Wey (2004).4 Barth et al. (2014) provide a theoretical framework to study the Scandinavian model of production and industrial relations. In their setting, two-tier bargaining structures and unions favour worker involvement and wage compression, with positive productivity effects related to workers effort and firm level investment. ...
Preprint
Full-text available
In this paper we present a search and matching model in which firms invest in sunk capital equipment. By comparing two wage setting scenarios, we show that a two-tier bargaining scheme, where a fraction of the salary is negotiated at firm level, raises the amount of investment per worker in the economy compared to a one-tier bargaining scheme, in which earnings are entirely negotiated at sectoral level. The model's main result is consistent with the positive correlation between investment per worker and the presence of a two-tier bargaining agreement that we find in a representative sample of Italian firms.
... The multilevel collaboration has over recent decades reduced the scope of industrial conflict, prevented uncontrolled wage growth and stimulated the productivity and restructuring of enterprises. It is a common understanding across the dividing line between employers and employees that the Norwegian industrial relations system has been beneficial for the economy (Gulbrandsen et al., 2002;Barth, Moene, & Willumsen, 2014). In a separate analysis not shown here the business leaders participating in the Leadership Study 2015 expressed strong support for the cooperation between the state and the partners in the labour market. ...
... The result is an economy characterized by a climate of cooperation and trust, worker co-determination, efficiency, continuous 'creative destruction', affluence and a highly coordinated and compressed income-distribution (Barth, Moene, & Willumsen, 2014). In other words, and important in connection with the Norwegian democratization of freedom, what we have in Norway is not just 'democratic capitalism' (Sejersted, 1993) but also 'egalitarian capitalism' (Thelen, 2014); that is, Norway has chosen a participatory and redistributional way to capitalist affluence. ...
... To fund these systems, the Nordic countries have promoted as high a labour market participation as possible. Public authorities have taken an active role with regard to other main social institutions, especially through regulation of the labour market, stimulating tripartite collaboration and encouraging renewal and innovation in the economy in general (Moene and Wallerstein, 2001;Moene, 2013;Moene, Barth and Willumsen, 2014). The Nordic welfare model has largely made the individual independent of the family. ...
... 1. Establishing country-level coordinated systems of wage bargaining that counter undesired increases in the dispersion of wage and productivity in the context of slowing productivity (OECD, 2016a); as the experience of Scandinavian countries shows, a "social contract" based on a more equitable distribution of market incomes and strong R&D investment can combine equity, inclusiveness and fast technological modernization, hence reviving productivity while ensuring a better distribution of its dividends (Agell and Lommerud, 1993;Moene and Wallerstein 1997;Barth et al., 2014;2015;Atkinson, 2015;IPSP 2018, Chapter 8). ...
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The authors propose a policy compact to achieve more inclusive growth in G20 countries so that economic growth regains the ultimate sense of improving all people’s lives. Guiding principles are: 1) prosperity is not just about income but about all relevant outcomes of well-being and capabilities to overcome the initial social disadvantage; 2) it is also about including people in participatory decision-making to enhance their dignity and control over their lives; 3) excluding people from reaping the benefits of growth will thwart social cohesion and well-being; 4) integrated policy approaches are needed to achieve inclusive growth, across policy domains and between national and global actions, including responsible management of migratory movements. Concrete policy actions are described that span education, labor, fiscal instruments, public and private governance.
... In terms of economics, the Nordic model has worked well. As an example, Sweden experienced higher growth than the USA from 1930 to 2010 (Barth et al. 2014). The Swedish economy also remained strong through the financial crisis of 2008 and has continued to do well in recent years. ...
Article
The emergence of new types and new levels of poverty in Sweden has spurred civil society organizations to take a more active role in domestic relief work. Their work is not least directed toward groups of poor with limited access to public welfare in Sweden, in most cases because they are not Swedish citizens. The arrival of groups like the vulnerable EU citizens and undocumented refugees has created a situation where civil society provides emergency relief for groups not eligible for long-term relief from the public sector. A new division of responsibility between civil society and the public sector is therefore being formed, and this division can be explained in terms of rights; the aid organizations are guided by the principles of human rights, while the public sector functions primarily according to social citizenship rights. This article documents the work of the Swedish City Missions, a large aid organization that has become an important actor in poverty relief work in Sweden. A never before conducted survey of 137,000 interventions performed by the Swedish City Missions gives an entirely new insight into the significance of civil society organizations in combating new and old types of poverty in Sweden. Which groups receive which types of aid and what does that tell us about the roles of civil society and the public sector in a rights perspective? The findings show that civil society organizations like the City Missions play a far from marginal role in the Swedish welfare state.
... On its turn the lower level, typically represented by a local union leader elected by the members of the local union, has enough autonomy and unions' support to commit the workers at the undertaking or company to a collective effort on behalf of the other members (Barth et al. 2014). Therefore, the lower level does not only behave as a receiver of instructions, it also emerges as the source granting the functioning of coordination or as the bottom-up pillar underpinning the overall system. ...
Article
Admittedly, organized interests are a relevant element in shaping national industrial relations systems. This paper, however, focuses on the functions of the state as a factor limiting or enhancing the ability of social actors to participate in the design of these national systems. It compares the role of the state in Norway and Spain as far as regulation and coordination are concerned. The coordination function is compared at two different levels: bipartite cooperation and tripartite cooperation seeking to understand how coordination at the upper level might influence the lower level. Regulation is then compared in its effects on the interactions among the parties and their autonomy as the fundamental principle of industrial relations. Sin duda alguna, los intereses de clase son un elemento fundamental en la configuración de los sistemas nacionales de relaciones industriales. Este artículo, sin embargo, adopta la perspectiva de las funciones del estado como factor que limita o refuerza la capacidad de los actores sociales para participar en el diseño de los respectivos sistemas nacionales. El estudio compara el papel del estado en Noruega y en España en lo que se refiere a regulación y coordinación. La coordinación se compara a dos niveles diferentes: la coordinación bipartita y la coordinación tripartita con el fin de entender de que manera la coordinación en el nivel superior influye en el nivel inferior. A continuación, se comparan los efectos de la regulación sobre las relaciones entre las partes y su autonomía como principio fundamental de las relaciones laborales.
... Similar to the other Nordic countries, Norway's trade union movement has always been shaped by an ideal of equality, especially the demand for equal pay for equal work. Trade unions thus try to contribute to reducing wage inequality whenever they can influence the determination of wages [24]. When wage negotiations are carried out at the company level, the trade unions compress wages among the employees of each company. ...
Article
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The Nordic countries are among the world's leading countries in international rankings on prosperity, productivity, social equity, trust, and health. Such positive results may be linked to how these countries have organized their working life. The aim of this article is to describe core elements of the Nordic working life model (emphasizing Norway) and discuss how globalization may challenge the model, and thereby influence public health. Based on an extensive review of relevant research, we show that the Nordic working life model with a coordinated wage bargaining system between well-organized employers and employees results in productive enterprises, small wage differences, good working environments, and a high level of well-being. Global trends of liberalization of working life, increased labor migration, the platform economy, reduced unionization, and more precarious work challenge the Nordic working life model and its reliance on standard working contracts. Such a trend may result in increased inequity, reduced generalized trust, and poorer public health. Politicians and other stakeholders in the Nordic countries should cope appropriately with globalization and technological changes so that the Nordic countries will uphold their well-organized working life and good societal achievements.
... However, under two-tier regimes, first stage 6 Related papers also include Braun (2011) and Haucap and Wey (2004). 7 Barth et al. (2014) provide a theoretical framework to study the Scandinavian model of production and industrial relations. In their setting, two-tier bargaining structures and unions favour worker involvement and wage compression, with positive productivity effects related to workers effort and firm level investment. ...
Article
In this paper we present a search and matching model with unions in which firms invest in sunk capital equipment. By comparing two wage setting scenarios, we show that a two-tier bargaining scheme, where a fraction of the salary is negotiated at firm level, raises the amount of investment per worker in the economy compared to a one-tier bargaining scheme, in which earnings are entirely negotiated at sectoral level. In two-tier schemes wages depend on the labour productivity at firm level. This reduces the expected duration of a vacancy for capital intensive firms, as they attract a larger number of job seekers. Capital remains unused for less time, boosting investment in the first place. The model’s main result is consistent with the positive correlation between investment per worker and the presence of a two-tier bargaining agreement that we find in a representative sample of Italian firms.
... Norway and the other Scandinavian countries constitute such decommodified contexts, as evident in the region's universal and egalitarian policies, known as the "Nordic model" or the "social democratic welfare regime" (Esping- Andersen 1990). Significantly, the Scandinavian context is characterized by powerful unions and centralized wage bargaining, underpinning the relatively compressed wage structure compared to other countries (Barth, Moene, and Willumsen 2014). Yet Scandinavian societies do feature high wealth inequalities, seemingly a paradox in countries considered to be prototypically social democratic. ...
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Although the Scandinavian countries are often considered to epitomize social democratic governance, Scandinavia’s profound wealth inequalities, seen in relation to the more modest income differences, constitutes a fascinating paradox. Drawing on class theoretical concerns with strategies for reproduction and a Bourdieusian emphasis on class fractions, we explore how class-origin wealth gaps evolved over the past 25 years in Norway, and how they compare to class-origin income gaps. First, we find that class-origin wealth gaps have increased in recent years, whereas income inequalities are fairly persistent among men, and increasing among women. We find that educational attainment is important for channeling income inequality, but that education is less important for understanding wealth gaps. Second, we document differences between people whose family contexts were most highly endowed with economic capital and those who grew up in families that were engaged in cultural fields or the professions. Finally, we highlight how analyses based solely on net worth neglect important ways class origin perpetuates and accelerates wealth inequalities via the acquisition of debt. We argue that recent decades have fostered new instruments for opportunity hoarding that are most successfully used by the sons and daughters of the economic upper class.
... Og selv om de generelle lønnskostnadene i Norge er høye, bidrar en nokså sammenpresset norsk lønnsstruktur til at høyt utdannet arbeidskraft er relativt rimelig, sammenlignet med situasjonen i mange andre høykostnadsland. Det blir ofte framhevet som et konkurransefortrinn for Norge (Barth et al., 2014). Vi må også huske at UKF i snitt er store, og at naeringer med mange UKF dermed får et høyt antall UKF-ansatte. ...
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Utenlandske investeringer er en viktig del av økonomien i mange land. Det gjelder også Norge, hvor utenlandskontrollerte foretak sysselsetter 21 prosent av arbeidstakerne i privat næringsliv. Samtidig vet vi at strømmene av investeringer internasjonalt er i endring, med vekst i aktiviteten fra stater som tidligere har investert lite utenlands. Det gjelder spesielt Kina, men også India, Russland og noen andre ikke-tradisjonelle investorland. I denne artikkelen studerer vi hvordan Norges posisjon som destinasjon for investeringer endrer seg. Vi diskuterer utviklingen i lys av etablerte teorier innen samfunnsøkonomi og statsvitenskap.
... This "double compression" implies that a compressed wage structure and redistributive social transfers first create low economic inequality (Barth, Moene, and Willumsen 2014), which, in comparative terms, weakens the link between immigrant earnings and their purchasing power in the housing market. Second, redistributive welfare state policies equalize the quality differences between neighborhoods (Wessel et al. 2017), meaning that poor neighborhoods are lifted to higher social standards through subsidies, regulations, and various programs for neighborhood planning and regeneration (Andersen 2002;Andersson 2006). ...
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Spatial assimilation theory claims that immigrants’ acculturation and socioeconomic progress will lead to converging neighborhood attainment relative to non-migrant natives. Recently, it has been argued that equalization of local services and life chances across neighborhoods in egalitarian welfare states may delay spatial assimilation by reducing immigrants’ incentives to move out of low-income areas with many (co-ethnic) immigrant neighbors. In this article, we extend this argument to study whether neighborhood equalization also contributes to intergenerational persistence in neighborhood contexts among descendants of immigrants in Norway. Using administrative data, we find that immigrant descendants as adults often remain in neighborhood contexts that resemble their childhood neighborhoods, characterized by relative economic disadvantage and comparatively few ethnic majority residents. Intergenerational persistence in neighborhood contexts is strongest among descendants of immigrants from Pakistan, the Middle East, and Africa. The remaining immigrant–native gaps in spatial economic inequality largely reflect differences in individuals’ education and earnings, family background, and childhood neighborhood context, but these factors matter less for ethnic neighborhood segregation. For both economic and ethnic dimensions of neighborhood attainment, childhood neighborhood context is the factor that matters most in accounting for immigrant–native gaps, whereas individual socioeconomic attainment is the least important. Overall, our findings point to a pattern of “uneven assimilation” among immigrant descendants, where spatial assimilation is slow despite rapid socioeconomic progress across immigrant generations in the egalitarian Norwegian welfare state.
... In Haucap and Wey's (2004) Cournot duopoly model the payoff from innovation is larger for a highly productive firm under centralised wage setting than under local wage bargaining. This provides incentives both for process innovation and, as other studies have shown (Moene and Wallerstein, 1997;Barth et al., 2014), for job creation and employment. By contrast, firm level bargaining allows less productive firms to stay in the market and reduces average productivity. ...
Article
We present theoretical and empirical evidence challenging early studies that found unions were detrimental to workplace innovation. Under our theoretical model, unions prefer product innovation to labour-saving technological process innovation, thus making union wage bargaining regimes more conducive to product innovation than competitive pay setting. We test the theory with population-representative workplace data for Britain and Norway. We find strong support for the notion that local bargaining leads to product innovation, either alone or together with technological innovation.
... 1 For an application of this methodology to the case of the Italian economy in recent decades, see Iacono and Ranaldi (2022). 2 See Fochesato and Bowles (2015) for a historical overview of Nordic exceptionalism in terms of the degree of egalitarianism or Aaberge, et al. (2018a); Barth, Moene, and Willumsen (2015); Iacono (2018) for an overview of the stylized facts describing the Nordic economies. increased from 0.251 to 0.384 in the period [1989][1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005]. ...
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According to standard measures of income inequality, the Nordic countries rank among the most equal economies in the world. This paper studies whether and how this picture changes when the focus is on inequality of income composition, meaning the heterogeneity in individuals’ factor income shares. We show that, for all countries, a shift in capital incomes toward the top since the early 1990s causes rising heterogeneity in individuals’ factor income shares. To explain this result, we highlight the role of dual taxation systems. For Denmark in 2009–2013, Finland (1990–2007), and Norway (1991–2005), rising capital shares contributed to changes in personal income inequality, while for Sweden our results lead to disregard the capital share as a determinant of increasing income inequality.
... In fact, wage growth cannot exceed what the tradable sector can handle, thus sustaining a sufficiently large, internationally competitive sector. This coordinated wage mitigates wage differentials between workers across firms and industries, establishing an egalitarian wage structure (Barth, Moene, & Willumsen, 2014). However, this Norwegian wage regime was developed under the male-breadwinner model and when it comes to wage formation, pattern bargaining implicitly values male-dominated sectors more highly in terms of value creation (Skjeie & Teigen, 2003). ...
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This article analyzes the role of the collective wage-setting institution of “pattern bargaining” in maintaining the gendered hierarchies of the labor market and gender pay gap in Norway. The gendered labor market is considered a main cause of the gender pay gap, yet current research and policy has not examined the relation of the gender pay gap to the way sectoral wages are set. Norway is an interesting case because its wage-setting model and gender equality are highly esteemed globally. However, although the wage-setting system in Norway creates an overall more egalitarian wage structure than other advanced industrial countries, it has a built-in gendered inequality that is not part of its current discussion on resolving the gender pay gap. We introduce egalitarian inequality to conceptualize this. The article examines the presentation of the gender pay gap in relation to the gendered labor market, and how the pattern bargaining model is presented as both a solution and a hindrance, and which discourse dominates. We analyze the public discourse on the gender pay gap and the pattern-bargaining model, and its interrelations, through the lens of policy advisory commissions appointed by the government, the Norwegian Official Commissions. The findings reveal a dual commitment of upholding both pattern bargaining and gender equality but hardly any willingness to adjust the pattern bargaining model to combat the gender pay gap. A clear hierarchy is expressed in which gender equality is subordinate to pattern bargaining.
... Across this period, the Norwegian welfare state has consistently been characterised by highly progressive taxation, an extensive transfer system to redistribute income, and a strong social insurance system. Social security is characterized by universal benefits which cover the whole population rather than means testing, with many benefits and transfers related to current or previous labor force participation (Barth, Moene, and Willumsen (2014); Lindbeck (1997)). The social security system, disability insurance and sick leave programmes are all based on income replacement whereby a worker is entitled to a benefit of a fixed percentage of the previous year's pay, or of the average over the last three years. ...
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We extend the standard intergenerational mobility literature by examining the relationship between adult outcomes of children and the timing of parental income during their childhood years, using data from Norway. We find first that, conditional on permanent household income, the child’s human capital is higher in households where income is balanced between the early childhood and late childhood years than in households with a more imbalanced income profile. Second, compared to that in the early and late periods of childhood, income in the middle period has relatively low productivity.
... Income inequality is higher in Australia than in Norway, and it is especially the top share of Australian earners that has 'taken off' in the past few decades (OECD, 2018b). In Norway, the relatively small income inequalities can be partly explained by a system of collective bargaining between employers and labour unions, ensuring wage coordination and compression across the occupational hierarchy (Barth et al., 2014). The combination of these factors could imply that Australia has larger inequalities in what money do for people's perception of their own SEP. ...
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In the literature on social inequalities in health, subjective socioeconomic position (SEP) is increasingly applied as a determinant of health, motivated by the hypothesis that having a high subjective SEP is health-enhancing. However, the relative importance of determinants of subjective SEP is not well understood. Objective SEP indicators, such as education, occupation and income, are assumed to determine individuals' position in the status hierarchy. Furthermore, an extensive literature has shown that past childhood SEP affects adult health. Does it also affect subjective SEP? In this paper, we estimate the relative importance of i) the common objective SEP indicators (education, occupation and income) in explaining subjective SEP, and ii) childhood SEP (childhood financial circumstances and parents' education) in determining subjective SEP, after controlling for objective SEP. Given that the relative importance of these factors is expected to differ across institutional settings, we compare data from two countries: Australia and Norway. We use data from an online survey based on adult samples, with N ≈ 1400 from each country. Ordinary least squares regression is conducted to assess how objective and childhood SEP indicators predict subjective SEP. We use Shapley value decomposition to estimate the relative importance of these factors in explaining subjective SEP. Income was the strongest predictor of subjective SEP in Australia; in Norway, it was occupation. Of the childhood SEP variables, childhood financial circumstances were significantly associated with subjective SEP, even after controlling for objective SEP. This association was the strongest in the Norwegian sample. Only the mother's education had a significant impact on subjective SEP. Our findings highlight the need to understand the specific mechanisms between objective and subjective SEP as determinants of inequalities in health, and to assess the role of institutional factors in influencing these complex relationships.
... An older adult immigrant, for the purposes of this study, describes a foreign-born person who either moved to another country at the age of retirement or moved to another country as a working adult then approached later life in the host societies (Castles et al., 2014;Hooyman & Kiyak, 2014;Warnes et al., 2004). Older immigrants are a heterogeneous group in numerous aspects, including immigration history, socioeconomic status, culture, religion, and life course (Barth et al., 2014;Moberg et al., 2016;Treas & Gubernskaya, 2016;Warnes et al., 2004). This heterogeneity creates additional complexity for researchers in capturing variation within and between ethnic groups (Hooyman & Kiyak, 2014). ...
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Better home care and home care technologies are no longer requested solely by nonimmigrant older adults but also by members of the fast-growing older adult immigrant population. However, limited attention has been given to this issue, or to the use of technology in meeting the needs of aging populations. The objective of this review is to map existing knowledge of older adult immigrants' use of information and communication technologies for home care service published in scientific literature from 2014 to 2020. Twelve studies met the established eligibility criteria in a systematic literature search. The results showed older adult immigrants faced similar barriers, which were independent of their ethnic backgrounds but related to their backgrounds as immigrants including lower socioeconomic status, low language proficiency, and comparatively lower levels of social inclusion. Technology use could be facilitated if older adult immigrants received culturally-tailored products and support from family members and from society. The results imply that the included studies do not address or integrate cultural preferences in the development of information and communication technology for home care services. Caregivers might provide an opportunity to bridge gaps between older immigrants' cultural preferences and technology design. This specific research field would also benefit from greater interest in the development of novel methodologies.
... This kind of complementarity can be sustainably reproducible, subject to the full and unambiguous demarcation of the action areas of the relevant institutions. Of all the real-life models, the middle (in relation to recognizing capitalist and socialist) development paths models -the Scandinavian and Malaysian/Singapore -correspond to this condition to the greatest extent (Barth et al. 2014;New economic model, 2010;Tan and Bhaskaran, 2015). They distinguish by a harmonious combination of purely market institutions and welfare society institutions for all. ...
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The author presents an approach to the comparison of fundamental institutional changes in China and Russia attributed to the after socialist countries. Proceeding from the analysis, the trend of the institutional divergence between China and Russia considered in the nineties later changed to the trend of convergence. A unifying feature of the both economies concludes in the prevailing institutions of state capitalism in combination with the attributes of socialized market. In the current moment, there are discrepancies with respect to fundamental institutional changes between two countries, which may result in the emergence of new divergence trend.
... A Scandinavian model of corporatism might have been a fitting description in the 1960s and 1970s, but even then, substantial differences existed (Rommetvedt, 2017b). Others have pointed to a Scandinavian model built on high work effort, small wage differentials, high productivity, and a generous welfare state (Barth et al., 2015). By and large, however, it is argued by others that the myth of exceptionalism is typically journalist driven (Arter, 2016). ...
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This chapter is a tour of the Scandinavian lobbying landscape providing the state of the art for research on a contested and necessary activity. We discuss the particular context of the Scandinavian countries and current trends relevant for lobbying. Lobbying is often juxtaposed with the corporatist channel which implies institutionalised contact patterns between politicians and organised interests. The corporatist channel has, however, declined in importance while a number of trends have led to more diverse interest group systems, and new actors have assumed a more prominent role in Scandinavian lobbying. Besides discussing such trends, we also present some of the main findings about strategies and techniques used and what similarities and dissimilarities exist between the countries.
... The tripartite cooperation between employers, unions and the state was fully institutionalised in the 1960s. Despite growing economic inequalities in the Nordic countries, the collective bargaining system with centralised salary negotiations, still generatescompared to other Western countriesa relatively egalitarian distribution of incomes (Barth, Moene, & Willumsen, 2015). Economic inequality is known to strongly correlate with trust in a society (Wilkinson & Pickett, 2010). ...
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In recent years, much attention has been paid to the white working class’ concern with their declining position in the neoliberal era. The hypothesis that social and economic insecurity provoke anger and xenophobia are unable to account for the Norwegian case. The Nordic model still acts as a buffer against neoliberal capitalism, making the white Norwegian working class less vulnerable than in comparable countries. This paper will argue that the Norwegian working class has defended the Nordic model by utilising a range of moral values. I use 56 qualitative interviews to examine the morality of the white Norwegian working class. The study is theoretically and methodologically inspired by Boltanski and Thévenot's work on ranking and legitimisation. The cultural configuration observed here deviates in certain ways from previous accounts in the USA, the UK, and France. The substance of Norwegian working-class morality emerges as different cultural repertoires which can be represented by three moral ideal types: the Good Samaritan, the socially responsible citizen, and the hardworking person. Furthermore, this paper suggests elements of cultural–historical continuity to explain the patterns observed.
... • Within firm growth of productivity having a bigger impact than reallocation of workers from low-to high-productivity firms on aggregate productivity growth . 4 • Lower dispersion of productivity in economies with compressed wage structures, as the compressed wage structure pushes low productivity companies out of the market (Barth et al., 2014). 5 • Lower dispersion of pay within and among unionized compared to non-union establishments for workers with similar measured skills and for the same workers who change employment over time (Freeman, 1984). ...
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This article presents an Agent-Based Model (ABM) that seeks to explain the concordance of sluggish growth of productivity and of real wages found in macroeconomic statistics, and the increased dispersion of firm productivity and worker earnings found in micro level statistics in advanced economies at the turn of the 21st century. It shows that a single market process unleashed by the decline of unionization can account for both the macro- and micro-economic phenomena, and that deunionization can be modeled as an endogenous outcome of competition between high wage firms seeking to raise productive capacity and low productivity firms seeking to cut wages. The model highlights the antipodal competitive dynamics between a “winner-takes-all economy” in which corporate strategies focused on cost reductions lead to divergence in productivity and wages and a “social market economy” in which competition rewards the accumulation of firm-level capabilities and worker skills with a more egalitarian wage structure.
... Nordic working life is characterized by great autonomy for workers (Esser and Olsen, 2011). Scandinavian countries can be described as small, open economies, characterised by high levels of work participation and technology, small wage differentials and generous welfare states, where wage compression fuels creative destruction, i.e., over time, the work force is moved to the more productive firms, and low-paid, lowproductive jobs disappear (Barth et al., 2014). Employees are compensated fully from the first day of sickness absence, and the individual employer bears the financial risk during the first 16 days of a spell. ...
Article
This paper develops a new method to study how workers’ career and wage profiles are shaped by internal labor markets (ILM) and job hierarchies in firms. We tackle the conceptual challenge of organizing jobs within firms into hierarchy levels by proposing a data-driven ranking method based on observed worker flows between occupations within firms. We apply our method to linked employer–employee data from Norway that record fine-grained occupational codes and track contract changes within firms. Our findings confirm existing evidence that is primarily based on case studies for single firms. We expand on this by documenting substantial heterogeneity in the structure and hierarchy of ILMs across a broad range of large firms. Our findings on wage and promotion dynamics in ILMs are consistent with models of careers in organizations.
Chapter
One main element of the Nordic model is a welfare-state characterised by comprehensive public responsibility for the well-being of citizens and residents. Another main element is an extensive collaboration between a strong trade union movement, centralised employers’ association and the state. Moreover, a unique quality of the Nordic model is that the various policies and institutions interact. There are considerable institutional complementarities between the various elements of the model. The Norwegian version of the Nordic welfare-state model rests on an elite consensus grown out of previous class compromises, and compromises between opposing interest groups. In the chapter, it is argued that the fate of the Norwegian model will depend, to a large extent, upon choices made by members of all the various elite groups within Norwegian society. It is therefore vital to learn how Norwegian elites today relate to the various domains of the Norwegian model and to the various issues dominating discourse in Norway.
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Many commodity-exporting countries saw their revenues plummet and experienced fiscal deficits during the pandemic. The economic rebound will restore resource exports/revenues and a new round of debate will be initiated on revenues utilization. Countries will decide either to internalize revenues or capitalize them with investments abroad. Our autoregressive distributed lag (ARDL) models provide evidence of the benefits Norway enjoys since it has not internalized revenues. The currency rate, long-term bond yields, and GDP growth are insulated from prices volatility. Furthermore, the country can absorb currency appreciations/devaluations and long-term credit rate hikes through government expenditure. However, monetary steering is favored in the long term (absorbs yield increases), while in the short run it can allow for speculative activities by credit investors. Countries should not internalize resource revenues to avoid experiencing decreased competitiveness and economic growth and increased credit rates. However, the temptation will be high enough since deficits and support packages cost a lot. This study also includes years of low prices. Thus, our research reveals the extent and limitations of diligent revenue management from a country considered as a role model.
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Hanushek et al (2015, ‘Returns to Skills Around the World: Evidence from PIAAC’, European Economic Review 73: 103) find a weak wage–skill relationship in countries with limited skill reward possibilities due to high union density, strict employment protection, and large public sector. If these factors also restrict employment possibilities and the incentives to join the labor market, a possible mirror image of the weak wage–skill relationship is a steeper employment–skill gradient. We use PIAAC data to estimate the employment–skill association, and the results for the whole sample of individuals give some indication that the employment–skill gradient is steeper in countries with strict employment rules and centralized bargaining. Our results for subgroups show imprecisely estimated employment–skill gradients for immigrants. For individuals with poor health conditions and low formal education, the estimated gradient is somewhat higher than in the whole sample in countries with high bargaining coverage, a large public sector, and centralized collective bargaining systems.
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This paper analyses the interplay between the allocation of authority within firms and workers’ exposure to automation risk. We propose an evolutionary model to study the complementary fit of job design and workplace governance as resulting from the adoption of worker voice institutions, in particular employee representation (ER). Two organizational conventions are likely to emerge in our framework: in one, workplace governance is based on ER and job designs have low automation risk; in the other, ER is absent and workers are involved in automation-prone production tasks. Using data from a large sample of European workers, we document that automation risk is negatively associated with the presence of ER, consistently with our theoretical framework. Our analysis helps to rationalize the historical experience of Nordic countries, where simultaneous experimentation with codetermination rights and job enrichment programmes has taken place. Policy debates about the consequences of automation on labour organization should avoid technological determinism and devote more attention to socio-institutional factors shaping the future of work.
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The fiscal powers of the Scottish government have increased significantly, resulting in the first (modest) regional differences in income tax rates within the UK. In fact, the current degree of fiscal autonomy would permit a radical shift towards a high-tax, high-spend ‘Scandinavian model’. It is found that the impact of such a change on the Scottish economy is likely to be positive only if the public value the increased public spending and are willing, and able, to accept a corresponding reduction in their take-home pay. It is concluded that the current bargaining system is unlikely to deliver such an outcome.
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Vi benytter endringer i satsene for fagforeningsfradrag i Norge mellom 2001 og 2012 og administrative registerdata til å identifisere hvordan skattefradraget og nettoprisen for medlemskap påvirker sannsynligheten for å være medlem i en fagforening. Vi finner at økt subsidiering bidrar til økt medlemskapssannsynlighet, mens økte priser for medlemskap reduserer sannsynligheten for fagforeningsmedlemskap. Hvis fagforeningsfradraget ikke hadde endret seg siden 2001, ville den aggregerte organiseringsgraden i privat sektor ha vært 5 prosentpoeng lavere enn den faktisk er. Betydningen av fradraget er imidlertid vesentlig større for noen næringer, og da særlig for industrien og for varehandelen.
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This paper examines the airline competition after liberalization through an empirical specification of a demand and pricing equation system. The system is estimated for the Scandinavian (Denmark, Norway, and Sweden) domestic airline market using a simultaneous-equations procedure. The purpose of this study is to gather the various reactions of the industry players and determine whether the competition model after liberalization, by studying routes covering 95% of these types of connections operated in this market. This study focuses on the mobility of same-day business travel passengers. This model, based on over 161 routes and over 56 fortnights from 2013 to 2015, allowed for the creation of a data panel intended to show whether or not the pattern of behavior in this market can be explained by the main oligopoly models. By estimating elasticities and analyzing behaviors in the airline market, this research can be helpful to transport authorities and airlines.
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While it is generally assumed that the aim of teacher evaluation is to formatively support teachers’ professional development, research finds that teacher evaluation practices are predominantly summative. This paper describes a Norwegian governmental policy experiment aiming to overcome this fallacy through a bargaining process, where experience-based knowledge was combined with research evidence. When preparing to introduce teacher evaluation, the Ministry of Education and Research commissioned a group of researchers and a group representing practitioners to identify teacher evaluation practices that are conducive for educational quality. Drawing on experiences from the policy experiment, the article discusses three approaches to teacher evaluation: the political, the administrative and the professional. The analysis indicates that successful implementation of interventions needs a new educational infrastructure and professional school leadership. One conclusion is that teacher evaluation cannot be successfully implemented through traditional linear approaches. A more productive approach is to treat it as a wicked problem.
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Once heralded in the 1950s and 1960s as a model welfare state, Sweden is now in transition and in trouble since its economic plunge in the early 1990s. This volume presents ten essays that examine Sweden's economic problems from a U.S. perspective. Exploring such diverse topics as income equalization and efficiency, welfare and tax policy, wage determination and unemployment, and international competitiveness and growth, they consider how Sweden's welfare state succeeded in eliminating poverty and became a role model for other countries. They then reflect on Sweden's past economic problems, such as the increase in government spending and the fall in industrial productivity, warning of problems to come. Finally they review the consequences of the collapse of Sweden's economy in the early 1990s, exploring the implications of its efforts to reform its welfare state and reestablish a healthy economy. This volume will be of interest to policymakers and analysts, social scientists, and economists interested in welfare states.
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This paper studies the considerably higher level of wage inequality in the United States than in nine other OECD countries. The authors find that the greater overall U.S. wage dispersion primarily reflects substantially more compression at the bottom of the wage distribution in the other countries. While differences in the distribution of measured characteristics help to explain some aspects of the international differences, higher U.S. prices (i.e., rewards to skills and rents) are an important factor. Labor market institutions, chiefly the relatively decentralized wage-setting mechanisms in the United States, provide the most persuasive explanation for these patterns. Copyright 1996 by University of Chicago Press.
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International comparisons of national social policy rely overwhelmingly on programme spending ratios. However, there are widespread problems with this type of data as an indicator of trends in societies' commitments to social protection. This paper suggests an alternative approach to understanding social commitments and introduces a new international data set of social insurance programmes that is comprised of important characteristics of three types of public insurance: unemployment, sick pay, and public pensions. The data are available annually from the 1970s for 18 OECD countries. Looking more closely at trends in two programme characteristics, income replacement rates and programme coverage, we develop an indicator of expected benefits. According to this indicator, there is considerably more evidence of welfare state retrenchment in recent years than most analyses of public spending have suggested. Copyright 2006, Oxford University Press.
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Sweden has a remarkable record in reducing inequality and virtually eliminating poverty. This paper shows that: 1) Sweden achieved its egalitarian income distribution and eliminated poverty largely because of its system of earnings and income determination, not because of the homogeneity of the population nor of its educational system. 2) In the job market Sweden is distinguished by a relatively egalitarian distribution of hours of work among those employed, which may be an interrelated part of the Swedish economic system, and until the recent recession, by a high employment rate. 3) Tax and transfer policies contribute substantially to Sweden's overall distribution record. In contrast to many social welfare systems, Sweden's is largely a workfare system, providing benefits for those with some work activity. 4) Part of Sweden's historic success in maintaining jobs for low wage workers while raising their wages resulted from policies that directly or indirectly buttress demand for low skill workers, notably through public sector employment. 5) Sweden's tax and transfer policies have maintained the position of lower income workers and families, including those with children, during its recent economic decline.
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The original Center for Business and Policy Studies (SNS) in Sweden and the National Bureau of Economic Research (NBER) in the United States (SNS-NBER) study of the Swedish labor market was written in the midst of the economic crisis of the early 1990s. This chapter is a sequel to that study and focuses on the postcrisis performance of the labor market, emphasizing institutional and other changes that have affected wage determination, inequality, and employment. Since the crisis, wage formation has become more decentralized. Centralized bargaining continues to set minimum wages in different sectors, but firms and unions bargain above the minimum and decide on specifics in local bargaining. Decentralization contributed to rising wage dispersion as wage outcomes were more likely to reflect market valuations for particular skills. Some of the 1990s increase in wage dispersion in Sweden presumably reflected catching up with market forces, but the catch-up does not seem complete, given the changing economic environment. Employment outcomes are worse for low-skilled persons and non-OECD (Organization for Economic Cooperation and Development) immigrants than for other workers. However, in the 1990s, the minimum wage increased in hotels and restaurants, which disproportionately employ the less skilled, presumably contributing to the low share of these sectors in the economy.
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Because of their more limited inequality and more comprehensive social welfare systems, many perceive average welfare to be higher in Scandinavian societies than in the United States. Why then does the United States not adopt Scandinavian-style institutions? More generally, in an interdependent world, would we expect all countries to adopt the same institutions? To provide theoretical answers to this question, we develop a simple model of economic growth in a world in which all countries benefit and potentially contribute to advances in the world technology frontier. A greater gap of incomes between successful and unsuccessful entrepreneurs (thus greater inequality) increases entrepreneurial effort and hence a country’s contribution to the world technology frontier. We show that, under plausible assumptions, the world equilibrium is asymmetric: some countries will opt for a type of “cutthroat” capitalism that generates greater inequality and more innovation and will become the technology leaders, while others will free-ride on the cutthroat incentives of the leaders and choose a more cuddly form of capitalism. Paradoxically, those with cuddly reward structures, though poorer, may have higher welfare than cutthroat capitalists; but in the world equilibrium, it is not a best response for the cutthroat capitalists to switch to a more cuddly form of capitalism. We also show that domestic constraints from social democratic parties or unions may be beneficial for a country because they prevent cutthroat capitalism domestically, instead inducing other countries to play this role.
Article
The distribution of pay differs significantly across countries and over time among advanced industrial societies. In this paper, institutional and political determinants of pay inequality an studied in sixteen countries from 1980 to 1992. The most important factor in explaining pay dispersion is the level of wage-setting, i.e., whether wages are set at the level of the individual, the plant, the industry, or the entire private sector. The impact of centralization is the same whether centralization occurs via collective bargaining or via government involvement in private-sector wage-setting. The concentration of unions and the share of the labor force covered by collective bargaining agreements also matter. After controlling for wage-setting institutions, other variables such as the governing coalition, the size of government, international openness, and the supply of highly educated workers have little impact. Economic, political, and norm-based explanations for the association of centralization with egalitarian outcomes are discussed.
Article
We estimate the effects of conditioning benefits on program participation among older long-term unemployed workers. We exploit a Swedish reform which reduced UI duration from 90 to 60 weeks for a group of older unemployed workers in a setting where workers who ex-hausted their benefits received unchanged transfers if they agreed to participate in a work practice program. Our results show that job finding increased as a result of the shorter duration of passive benefits. The time profile of the job-finding effects suggests that the effects are due to deterrence effects during the program-entry phase. We find no evidence of wage reductions, suggesting that the increased job-finding rate was driven by increased search intensity rather than lower reservation wages.
Article
Theory predicts that performance pay boosts wage dispersion. Workers retain a share of individual productivity shocks and high‐efficiency workers receive compensation for greater effort. Collective bargaining can mitigate the effect of performance pay on wage inequality by easing monitoring of common effort standards and group‐based pay schemes. Analyses of longitudinal employer–employee data show that the introduction of performance‐related pay raises wage inequality in non‐union firms, but not in firms with high union density. Although performance‐related pay appears to be on the rise, the overall impact on wage dispersion is likely to be small, particularly in European countries with influential unions.
Article
Is the political support for welfare policy higher or lower in less egalitarian societies? We answer the question using a model of welfare policy as publicly financed insurance that pays benefits in a redistributive manner. When voters have both redistributive and insurance motives for supporting welfare spending, the effect of inequality depends on how benefits are targeted. Greater inequality increases support for welfare expenditures when benefits are targeted to the employed but decreases support when benefits are targeted to those without earnings. With endogenous targeting, support for benefits to those without earnings declines as inequality increases, whereas support for aggregate spending is a V-shaped function of inequality. Statistical analysis of welfare expenditures in advanced industrial societies provides support for key empirical implications of the model.
Article
This article presents a meta-analysis of recent microeconometric evaluations of active labour market policies. We categorise 199 programme impacts from 97 studies conducted between 1995 and 2007. Job search assistance programmes yield relatively favourable programme impacts, whereas public sector employment programmes are less effective. Training programmes are associated with positive medium-term impacts, although in the short term they often appear ineffective. We also find that the outcome variable used to measure programme impact matters, but neither the publication status of a study nor the use of a randomised design is related to the sign or significance of the programme estimate.
Book
As events highlight deep divisions in attitudes between America and Europe, this is a very timely study of different approaches to the problems of domestic inequality and poverty. Based on careful and systematic analysis of national data, the authors describe just how much the two continents differ in their level of State engagement in the redistribution of income. Discussing various possible economic explanations for the difference, they cover different levels of pre-tax income, openness, and social mobility; they survey politico-historical differences such as the varying physical size of nations, their electoral and legal systems, and the character of their political parties, as well as their experiences of war; and they examine sociological explanations, which include different attitudes to the poor and notions of social responsibility. Most importantly, they address attitudes to race, calculating that attitudes to race explain half the observed difference in levels of public redistribution of income. This important and provocative analysis will captivate academic and serious lay readers in economics and welfare systems.
Book
Advanced economies have experienced a tremendous increase in material well-being since the industrial revolution. Modern innovations such as personal computers, laser surgery, jet airplanes, and satellite communication have made us rich and transformed the way we live and work. But technological change has also brought with it a variety of social problems. It has been blamed at various times for increasing wage and income inequality, unemployment, obsolescence of physical and human capital, environmental deterioration, and prolonged recessions. To understand the contradictory effects of technological change on the economy, one must delve into structural details of the innovation process to analyze how laws, institutions, customs, and regulations affect peoples' incentive and ability to create new knowledge and profit from it. To show how this can be done, Philippe Aghion and Peter Howitt make use of Schumpeter's concept of creative destruction, the competitive process whereby entrepreneurs constantly seek new ideas that will render their rivals' ideas obsolete. Whereas other books on endogenous growth stress a particular aspect, such as trade or convergence, this book provides a comprehensive survey of the theoretical and empirical debates raised by modern growth theory. It develops a powerful engine of analysis that sheds light not only on economic growth per se, but on the many other phenomena that interact with growth, such as inequality, unemployment, capital accumulation, education, competition, natural resources, international trade, economic cycles, and public policy.
Article
We present a theoretical analysis of different types of active labor market policies in the context of a search-matching model. We find that labor market training is effective in bringing down unemployment while public employment services and subsidized jobs are not effective at all. This theoretical finding is confirmed in an explorative empirical analysis using data from 20 OECD countries.
Article
Proposes a theory that explains why smaller firms have higher and more variable growth rates than larger firms. Relying on employer heterogeneity and market selection to generate patterns of employer growth and failure, the model states that efficient firms grow and survive while inefficient firms decline and fail, regardless of firm size. However, firms that fail are actually firms that, if given more time to succeed, would have grown more slowly. These slow growing firms are most often smaller firms. Also provided is a behavior characterization of entry and prices in equilibrium, which is defined as a pair of functions that characterize optimal output and exit behavior of firms. (SFL)
Article
This paper demonstrates that there is a robust empirical association between the extent to which an economy is exposed to trade and the size of its government sector. This association holds for a large cross-section of countries, in low- as well as high-income samples, and is robust to the inclusion of a wide range of controls. The explanation appears to be that government consumption plays a risk-reducing role in economies exposed to a significant amount of external risk. When openness is interacted with explicit measures of external risk, such as terms-of-trade uncertainty and product concentration of exports, it is the interaction terms that enter significantly, and the openness term loses its significance (or turns negative). The paper also demonstrates that government consumption is the majority of countries.
Article
The authors investigate the effects of wage compression through centralized collective bargaining when growth depends on the continual reallocation of labor from older, less productive plants to new, more productive plants. They first study the compression of wage differentials that derive from decentralized bargaining in heterogeneous plants. The authors then consider wage compression when wage differentials arise from competition among employers over workers of differing quality. They show that wage compression through centralized bargaining can result in higher profits and greater entry of new plants than either decentralized bargaining or a competitive labor market. Copyright 1997 by University of Chicago Press.
Article
Observed human capital explains less than half of wage variation. In BLS Industry Wage Surveys, establishment-based wage differentials (controlling for occupation) account for 20–70 percent of intra-industry wage variation. This corresponds to a standard deviation in wages of 14 percent of the mean, almost as large as interindustry wage variation. Investigation suggests that establishment wage differentials are not random variations or returns to usual measures of human capital.
Article
We construct a locational model of majority voting when competing parties offer special favours to interest groups. Each group's membership is heterogeneous in its affinities for the two parties. Individuals face a trade-off between party affinity and their own transfer receipts.The model is sufficiently general to yield two often-discussed but competing theories as special cases. If the parties are equally effective in delivering transfers to any group, the outcome of the process conforms to the `swing voter' theory: both parties woo the politically-central groups most responsive to economic favours. If groups have party affiliations and each party is more effective in delivering favours to its own support group, we can get the `machine politics' outcome, where each party dispenses favour to its core support group. But in some circumstances the machine may find it advantageous to tax its core and use the proceeds to win the support of other voters.
Article
Published in: Scandinavian Journal 95/4, 1993, pp. 559-579
Article
Different beliefs about the fairness of social competition and what determines income inequality influence the redistributive policy chosen in a society. But the composition of income in equilibrium depends on tax policies. We show how the interaction between social beliefs and welfare policies may lead to multiple equilibria or multiple steady states. If a society believes that individual effort determines income, and that all have a right to enjoy the fruits of their effort, it will choose low redistribution and low taxes. In equilibrium, effort will be high and the role of luck will be limited, in which case market outcomes will be relatively fair and social beliefs will be self-fulfilled. If, instead, a society believes that luck, birth, connections, and/or corruption determine wealth, it will levy high taxes, thus distorting allocations and making these beliefs self-sustained as well. These insights may help explain the cross-country variation in perceptions about income inequality and choices of redistributive policies.
Article
A dynamic stochastic model for a competitive industry is developed in which entry, exit, and the growth of firms' output and employment is determined. The paper extends long-run industry equilibrium theory to account for entry, exit, and heterogeneity in the size and growth rate of firms. Conditions under which there is entry and exit in the long run are developed. Cross sectional implications and distributions of profits and value of firms are derived. Comparative statics on the equilibrium size distribution and turnover rates are analyzed. Copyright 1992 by The Econometric Society.
Article
A model of endogenous growth is developed in which growth is driven by vertical innovations that involve creative destruction. Equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends negatively upon the amount expected next period. The paper analyzes positive and normative properties of stationary equilibria, and shows conditions for the existence of cyclical equilibria and no-growth traps. The growth rate may be more or less than optimal because a business-stealing effect counteracts the usual spillover and appropriability effects. In addition, innovations tend to be too small. Copyright 1992 by The Econometric Society.
Article
This paper presents an analysis of a 2-person noncooperative bargaining game in which one party is free, subject to certain frictions, to switch between rival partners. This permits us to capture the notion of an asymmetry between "insiders" and "outsiders" in the context of a firm bargaining with its workers, in the presence of unemployment.
Article
This paper considers local wage bargaining as a sequential game and focus es on how different rules of the game affect employment and equilibri um payment to workers and employers. Work-to-rule and other go-slow t hreats lead to low employment, while strike threats lead to high empl oyment. An increase in the bargaining power of the union induces high er or unchanged equilibrium employment in the strike-threat case, whi le employment is reduced in the slow-down case. Finally, if all kinds of industrial actions are legal, only one is credible. Which type de pends on the parameters of the model. Copyright 1988 by Royal Economic Society.
Article
This paper uses cross-sectional and longitudinal data to examine differences in pay for equally-skilled workers in different ind ustries. The major finding is that there is substantial dispersion in wages across industries, even after allowing for measured and unmeas ured labor quality, working conditions, fringe benefits, transitory d emand shocks, the threat of union-ization, union bargaining power, fi rm size, and other factors. In addition, evidence is presented demons trating that turnover has a negative relationship with industry wage differentials. These findings suggest that workers in high-wage indus tries receive noncompetitive rents. Copyright 1988 by The Econometric Society.
Article
This paper explores the hypothesis that wage differentials between skill groups across countries are consistent with a demand and supply framework. Using micro data from 15 countries we find that about one third of the variation in relative wages between skill groups across countries is explained by differences in net supply of skill groups. The demand and supply framework does an even better job at explaining relative wages of low skilled workers. Copyright 2004 Royal Economic Society.
Article
Are competitive wage premia an obstacle to growth? The answer of the architects of the Scandinavian 'model' in the 1950s and 1960s was in the affirmative. By punishing expansive and growth enhancing sectors of the economy, competitive wage premia imposed an unwarranted drag on the rate of structural change. The authors formalize this intuition using a two-sector endogenous growth model, considering both open and closed economy cases. They also show that egalitarian pay compression, combined with active labor market policies, works in the same way as an industrial policy of subsidizing sunrise industries. Copyright 1993 by The editors of the Scandinavian Journal of Economics.
Article
We evaluate the impact of labour market programmes on unemployment durations in Norway, by means of a distribution-free mixed proportional competing risks hazard rate model. We find that programme participation, once completed, improves employment prospects, but that there is often an opportunity cost in the form of a lock-in effect during participation. The average net effect of programme participation on the length of the job search period is found to be around zero. For participants with poor employment prospects, the favourable post-programme effects outweigh the negative lock-in effects. Copyright 2006 Blackwell Publishing Ltd.
Article
University of Linz, Austria and Institute for Social Research, Oslo, Norway, respectively. The paper was written during our stay at the University of California at Berkeley. We are indebted to the Institute of Industrial Relations, UC Berkeley, for its hospitality, and acknowledge financial support by the Austrian ‘Fonds zur Forderung der wissenschaftlichen Forschung’ under the project JO548-SOZ (ZWEIMÜLLER) as well as by the Norwegian NORAS under the LOS-program (BARTH). We are grateful to BILL DICKENS for access to the US-CPS 1983, to MAHMOOD ARAI for cooperation concerning Swedish data as well as to LUTZ BELLMANN and MASAO NAKAMURA who provided regression results for Germany and Canada, respectively. Thanks to ROBERT ROWTHORNE for comments on an earlier draft.
Article
One of the perennial problems of business cyde theory has been the search for a convincing empirical description and theoretical explanation of the behaviour of wage rates during fluctuations in output and employment. Even the empirical question is hardly settled, although the most recent careful study (Geary and Kennan) confirms the prevailing view that real-wage movements are more or less independent of the business cycle. There are really two subquestions here. The first presumes that nominal wage stickiness is the main route by which nominal disturbances have real macroeconomic effects, and asks why nominal wages should be sticky. The second focuses on real wages, and asks why fluctuations in the demand for labour should so often lead to large changes in employment and small, unsystematic, changes in the real wage.
Inflation in the open economy: A Norwegian model Worldwide inflation: Theory and recent experience Measuring and analyzing cross-country differences in firm dynamics
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Aukrust, O. (1977). Inflation in the open economy: A Norwegian model. In L. B. Krause and W. S. Salant (Eds.), Worldwide inflation: Theory and recent experience, Washington, D.C. Brookings institution. Bartelsman, E., J. Haltiwanger, and S. Scarpetta (2009). Measuring and analyzing cross-country differences in firm dynamics. In Producer Dynamics: New Evidence from Micro Data, pp. 15–76.
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Part I: Can political models predict union behaviour? In R
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Part II: Bargaining structure and economic performance Trade Union Behaviour, Pay Bargaining and Economic Performance OECD Employment Outlook
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Moene, K. O., M. Wallerstein, and M. Hoel (1993). Part II: Bargaining structure and economic performance. In R. J. Flanagan, K. O. Moene, and M. Wallerstein (Eds.), Trade Union Behaviour, Pay Bargaining and Economic Performance. Oxford: Claren-don Press. OECD (2012). OECD Employment Outlook. Paris: OECD.
How Bright are the Northern Lights? Some Questions about Sweden
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