IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp12093.html
   My bibliography  Save this paper

Wage Flexibility in a Unionized Economy with Stable Wage Dispersion

Author

Listed:
  • Carlsson, Mikael

    (Uppsala University)

  • Häkkinen Skans, Iida

    (National Institute of Economic Research - NIER)

  • Nordström Skans, Oskar

    (Uppsala University)

Abstract

The paper estimates how wages respond to changes in regional unemployment using detailed Swedish micro data. The study is set in an economy with close to complete union coverage where real wages have grown continuously in all parts of the wage distribution for the past 15 years, and where the aggregate wage dispersion has remained constant for the same period. Our results show that this aggregate stability is coupled with non-trivial flexibility in terms of wage adjustments to changes in regional unemployment. Accounting for the fluctuations in composition of the employees is important for the estimated elasticity of wages. Wage adjustments are larger for employees with high unemployment risk and for new hires entering from unemployment.

Suggested Citation

  • Carlsson, Mikael & Häkkinen Skans, Iida & Nordström Skans, Oskar, 2019. "Wage Flexibility in a Unionized Economy with Stable Wage Dispersion," IZA Discussion Papers 12093, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12093
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp12093.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Albaek, K. & Asplund, R. & Blomskog, S. & Barth, E. & Guomundsson,B.R. & Karlsson, V. & Madsen, E.S., 1999. "Domensions of the Wage-Unemployment Relationship in the Nordic Countries: Wage Flexibility without Wage Curves," Papers 99-24, Carleton - School of Public Administration.
    2. Oskar Nordström Skans & Per-Anders Edin & Bertil Holmlund, 2009. "Wage Dispersion Between and Within Plants: Sweden 1985-2000," NBER Chapters, in: The Structure of Wages: An International Comparison, pages 217-260, National Bureau of Economic Research, Inc.
    3. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 1-25.
    4. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    5. Mark Gertler & Christopher Huckfeldt & Antonella Trigari, 2020. "Unemployment Fluctuations, Match Quality, and the Wage Cyclicality of New Hires," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(4), pages 1876-1914.
    6. Paul Gregg & Stephen Machin & Mariña Fernández‐Salgado, 2014. "Real Wages and Unemployment in the Big Squeeze," Economic Journal, Royal Economic Society, vol. 0(576), pages 408-432, May.
    7. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    8. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle.
    9. Haefke, Christian & Sonntag, Marcus & van Rens, Thijs, 2013. "Wage rigidity and job creation," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 887-899.
    10. Maarten Goos & Alan Manning & Anna Salomons, 2014. "Explaining Job Polarization: Routine-Biased Technological Change and Offshoring," American Economic Review, American Economic Association, vol. 104(8), pages 2509-2526, August.
    11. Christopher A. Pissarides, 2009. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," Econometrica, Econometric Society, vol. 77(5), pages 1339-1369, September.
    12. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-689, August.
    13. repec:fth:prinin:343 is not listed on IDEAS
    14. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
    15. Mikael Carlsson & Andreas Westermark, 2022. "Endogenous Separations, Wage Rigidities, and Unemployment Volatility," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 332-354, January.
    16. Timothy J. Bartik, 2002. "Instrumental Variable Estimates of the Labor Market Spillover Effects of Welfare Reform," Upjohn Working Papers 02-78, W.E. Upjohn Institute for Employment Research.
    17. Bell, Brian & Nickell, Stephen & Quintini, Glenda, 2002. "Wage equations, wage curves and all that," Labour Economics, Elsevier, vol. 9(3), pages 341-360, July.
    18. Anabela Carneiro & Paulo Guimarães & Pedro Portugal, 2012. "Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 133-152, April.
    19. Olivei, Giovanni & Tenreyro, Silvana, 2010. "Wage-setting patterns and monetary policy: International evidence," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 785-802, October.
    20. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    21. Iacopo Morchio, 2020. "Work Histories And Lifetime Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 321-350, February.
    22. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    23. Edward P. Lazear & Kathryn L. Shaw, 2009. "The Structure of Wages: An International Comparison," NBER Books, National Bureau of Economic Research, Inc, number laze08-1.
    24. Lazear, Edward P. & Shaw, Kathryn L. (ed.), 2009. "The Structure of Wages," National Bureau of Economic Research Books, University of Chicago Press, edition 2, number 9780226470504, August.
    25. Blanchflower, David G & Oswald, Andrew J, 1994. "Estimating a Wage Curve for Britain: 1973-90," Economic Journal, Royal Economic Society, vol. 104(426), pages 1025-1043, September.
    26. Adrian Adermon & Magnus Gustavsson, 2015. "Job Polarization and Task-Biased Technological Change: Evidence from Sweden, 1975–2005," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(3), pages 878-917, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Susan Athey & Lisa K. Simon & Oskar N. Skans & Johan Vikstrom & Yaroslav Yakymovych, 2023. "The Heterogeneous Earnings Impact of Job Loss Across Workers, Establishments, and Markets," Papers 2307.06684, arXiv.org, revised Feb 2024.
    2. Christopher F. Baum & Hans Lööf & Andreas Stephan & Klaus F. Zimmermann, 2024. "Estimating the Wage Premia of Refugee Immigrants: Lessons from Sweden," ILR Review, Cornell University, ILR School, vol. 77(4), pages 562-597, August.
    3. Andrea Garnero, 2021. "The impact of collective bargaining on employment and wage inequality: Evidence from a new taxonomy of bargaining systems," European Journal of Industrial Relations, , vol. 27(2), pages 185-202, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Víctor M. Montuenga‐Gómez & José M. Ramos‐Parreño, 2005. "Reconciling the Wage Curve and the Phillips Curve," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 735-765, December.
    2. Joan Daouli & Michael Demoussis & Nicholas Giannakopoulos & Ioannis Laliotis, 2017. "The wage curve before and during the Greek economic crisis," Empirical Economics, Springer, vol. 52(1), pages 59-77, February.
    3. Sergio Destefanis & Giovanni Pica, 2010. "It’s wages, it’s hours, it’s the Italian wage curve," CSEF Working Papers 247, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    4. Verdugo, Gregory, 2016. "Real wage cyclicality in the Eurozone before and during the Great Recession: Evidence from micro data," European Economic Review, Elsevier, vol. 82(C), pages 46-69.
    5. Adamopoulou, Effrosyni & Villanueva, Ernesto, 2022. "Wage determination and the bite of collective contracts in Italy and Spain," Labour Economics, Elsevier, vol. 76(C).
    6. Merkl, Christian & Stüber, Heiko, 2024. "Wage and employment cyclicalities at the establishment level," European Economic Review, Elsevier, vol. 161(C).
    7. Bjorn Dapi, 2020. "Wage Cyclicality and Composition Bias in the Norwegian Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(4), pages 1403-1430, October.
    8. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    9. Koenig, Felix & Manning, Alan & Petrongolo, Barbara, 2014. "Reservation wages and the wage flexibility puzzle," LSE Research Online Documents on Economics 60613, London School of Economics and Political Science, LSE Library.
    10. James Hines & Hilary Hoynes & Alan Krueger, 2001. "Another Look at Whether a Rising Tide Lifts All Boats," Working Papers 833, Princeton University, Department of Economics, Industrial Relations Section..
    11. Choi, Sekyu & Figueroa, Nincen & Villena-Roldán, Benjamin, 2020. "Wage Cyclicality Revisited: The Role of Hiring Standards," MPRA Paper 120307, University Library of Munich, Germany, revised 21 Apr 2022.
    12. García-Mainar , Inmaculada & Montuenga-Gómez , Víctor M., 2012. "Wage dynamics in Spain: evidence from individual data (1994-2001)," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 24, pages 41-58.
    13. Herbert Brücker & Elke J. Jahn, 2011. "Migration and Wage‐setting: Reassessing the Labor Market Effects of Migration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113, pages 286-317, June.
    14. Lydon, Reamonn & Lozej, Matija, 2018. "Flexibility of new hires’ earnings in Ireland," Labour Economics, Elsevier, vol. 53(C), pages 112-127.
    15. Daniel Schaefer & Carl Singleton, 2017. "Real Wages and Hours in the Great Recession: Evidence from Firms and their Entry-Level Jobs," CESifo Working Paper Series 6766, CESifo.
    16. Mikael Carlsson & Andreas Westermark, 2022. "Endogenous Separations, Wage Rigidities, and Unemployment Volatility," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 332-354, January.
    17. Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2009. "New evidence on the dynamic wage curve for Western Germany: 1980-2004," Labour Economics, Elsevier, vol. 16(1), pages 47-51, January.
    18. Ilias Livanos, 2010. "The Wage-Local Unemployment Relationship in a Highly Regulated Labour Market: Greece," Regional Studies, Taylor & Francis Journals, vol. 44(4), pages 389-400.
    19. Reinhold Kosfeld & Christian Dreger, 2018. "Local and spatial cointegration in the wage curve – a spatial panel analysis for german regions," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 38(1), pages 53-75, February.
    20. Bauer, Anja & Lochner, Benjamin, 2020. "History dependence in wages and cyclical selection: Evidence from Germany," Labour Economics, Elsevier, vol. 67(C).

    More about this item

    Keywords

    wages; unemployment; unions; wage flexibility;
    All these keywords.

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp12093. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.