Politics in wage setting: does government colour matter? |
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Authors: | Kåre Johansen Ørjan Mydland Bjarne Strøm |
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Institution: | (1) Department of Economics, Dragvoll, Norwegian University of Science and Technology, 7491 Trondheim, Norway |
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Abstract: | This paper studies the relationship between wage formation and the political colour of the government in an economy with a
centralized wage bargaining system. Ideological, organizational and personal ties between the central trade union and the
social democratic political party suggest that the trade union may behave significantly different in wage negotiations under
a social democratic than under a conservative government. Using time series data for Norway, we estimate that changing from
a conservative to a social democratic central government significantly reduces manufacturing wages and makes wages more responsive
to unemployment. This result is consistent with a wage bargaining model augmented by political preferences of the union leaders
and suggests that the effect of bargaining coordination depends on the political colour of the government. The estimated effects
are both robust with respect to model specification and stable over time.
We are grateful to Fredrik Wulfsberg, participants at seminars in Trondheim and Oslo, and an anonymous referee for valuable
comments. |
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Keywords: | Wages Political regime Time series analysis |
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