Prices, Productivity and Wage Bargaining in Open Economies

28 Pages Posted: 9 May 2008

See all articles by Anders Forslund

Anders Forslund

IFAU - Institute for Labour Market Policy Evaluation; Uppsala University

Nils Gottfries

Uppsala University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Andreas Westermark

Sveriges Riksbank

Date Written: 2007-09

Abstract

According to the standard union bargaining model, unemployment benefits should have big effects on wages, but product-market prices and productivity should play no role in the wage bargain. We formulate an alternative strategic bargaining model, where labour and product-market conditions together determine wages. A wage equation is derived and estimated on aggregate data for four Nordic countries. Wages are found to depend not only on unemployment and the replacement ratio, but also on productivity, international prices and exchange rates. There is evidence of considerable nominal wage rigidity. Exchange rate changes have large and persistent effects on competitiveness.

Suggested Citation

Forslund, Anders and Gottfries, Nils and Westermark, Andreas, Prices, Productivity and Wage Bargaining in Open Economies (2007-09). Scandinavian Journal of Economics, Vol. 110, Issue 1, pp. 169-195, March 2008, Available at SSRN: https://ssrn.com/abstract=1131011 or http://dx.doi.org/10.1111/j.1467-9442.2008.00531.x

Anders Forslund (Contact Author)

IFAU - Institute for Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden
018 471 70 76 (Phone)

Uppsala University ( email )

Uppsala, SE-751 20
Sweden

Nils Gottfries

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden
+46 18 471 2304 (Phone)
+46 18 471 1478 (Fax)

HOME PAGE: http://www.nek.uu.se/faculty/gottfries/index.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Andreas Westermark

Sveriges Riksbank ( email )

Brunkebergstorg 11
Stockholm, 10337
Sweden

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