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The wage structure

The Great Contraction the evolution of inter-industry wage differentials in Sweden 1930-1950 Authors: Svante Prado and Joacim Waara Affiliation: School of Business, Economics and Law, University of Gothenburg. The wage structure. The wage structure is multifaceted

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The wage structure

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  1. The Great Contraction the evolution of inter-industry wage differentials in Sweden 1930-1950Authors: Svante Prado and JoacimWaaraAffiliation: School of Business, Economics and Law, University of Gothenburg

  2. The wage structure • The wage structure is multifaceted • Our focus is inter-industrial wage differentials • Driven by market forces or institutions? • Markets (supply and demand) • Institutions: • How wage negotiations are organized • The union’s bargaining power • The objective’s of the negotiating parties

  3. Measuring sigma convergence (i) Studying groups of industries + time saving + enables long time series - no industry-specific information (ii) Studying industries at disaggregated levels + gives more information + gives more variation • Laborious (solution: we draw on a new database on wages, HILD) • Inter-temporal heterogeneity (solution: Kinetic index methodology (Bowley 1885; Feinstein 1990))

  4. inter-industry wage dispersion (male), 1921-1967 (CoV)

  5. Measuring beta convergence • Low-wage industries grow faster than high-wage industries • Unconditional convergence • Descriptive measure • We would like to hold constant various factors: • Export/import • Skill intensity (education levels) • Raw material based or not

  6. Sweden 1935-1950 • Devaluation • Excess demand for labour • Increased productivity • Rationalisation changes labour demand • Strong domestic demand in the interwar period • Export industry expands rapidly after WWII

  7. “The Swedish model” • Social democratic party held the power 1932-1976 • The role of the state? (Labour union and the Social democratic party “Rowing the boat together”) • Union monopolism • Economic planning • Private ownership • State + “big” business • Centralized bargaining for wages

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