NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Wage-Setting Institutions as Industrial Policy

Steven J. Davis, Magnus Henrekson

NBER Working Paper No. 7502
Issued in January 2000
NBER Program(s):   LS

Centralized wage-setting institutions compress relative wages. Motivated by this fact, we investigate the effects of centralized wage setting on the industry distribution of employment. We examine Sweden's industry distribution from 1960 to 1994 and compare it to the U.S. distribution over the same period. We also relate U.S.-Swedish differences in the industry distribution and their evolution over time to the structure of relative wages between and within industries. The empirical results identify the rise and fall of centralized wage-setting arrangements as a major factor in the evolution of Sweden's industry distribution. The compression associated with centralized wage-setting shifted the industry distribution of Swedish employment in three respects: away from industries with high wage dispersion among workers, away from industries with a high mean wage, and, most powerfully, away from industries with a low mean wage. By the middle 1980s, these wage structure effects accounted for about 40 percent of U.S.-Swedish differences in the industry distribution. The dissolution of Sweden's centralized wage-setting arrangements beginning in 1983 led to widening wage differentials and a reversal in the evolution of U.S.-Swedish differences in industry structure.

download in pdf format
   (4976 K)

email paper

This paper is available as PDF (4976 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Davis, Steven J. and Magnus Henrekson. "Wage-Setting Institutions As Industrial Policy," Labour Economics, 2005, v12(3,Jun), 345-377.

Users who downloaded this paper also downloaded these:
Neumark, Schweitzer, and Wascher w6536 The Effects of Minimum Wages on the Distribution of Family Incomes: A Non-Parametric Analysis
Harrison and Rodriguez-Clare w15261 Trade, Foreign Investment, and Industrial Policy for Developing Countries
Blau and Kahn w4678 International Differences in Male Wage Inequality: Institutions versus Market Forces
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us