Wage Structure and Public Sector Employment: Sweden versus the United States 1970-2002

David Domeij () and Lars Ljungqvist

No 5921, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Swedish census data and tax records reveal an astonishing wage compression; the Swedish skill premium fell by more than 30 percent between 1970 and 1990 while the U.S. skill premium, after an initial decline in the 1970s, rose by 8-10 percent. Since then both skill premia have increased by around 10 percentage points in 2002. Theories that equalize wages with marginal products can rationalize these disparate outcomes when we replace commonly used measures of total labour supplies by private sector employment. Our analysis suggests that the dramatic decline of the skill premium in Sweden is the result of an expanding public sector that today comprises roughly one third of the labor force, and that expansion has largely taken the form of drawing low-skilled workers into local government jobs that service the welfare state.

Keywords: employment; private sector; public sector; skill premium; Sweden; United States (search for similar items in EconPapers)
JEL-codes: E24 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab, nep-ltv, nep-mac and nep-pbe
Date: 2006-11
View list of references

Downloads: (external link)
http://www.cepr.org/pubs/dps/DP5921.asp (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Wage Structure and Public Sector Employment: Sweden versus the United States 1970-2002 (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:5921

Ordering information: This working paper can be ordered from
http://www.cepr.org/pubs/dps/DP5921.asp

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers
Address: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Series data maintained by ().