Outsider Unemployment, Insider Wages, and the Disappearance of the Swedish Wage Curve

Mikael Carlsson (), Iida Häkkinen Skans () and Oskar Nordström Skans ()
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Mikael Carlsson: Uppsala University and Sveriges Riksbank
Iida Häkkinen Skans: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Oskar Nordström Skans: Uppsala University, IZA, and RFBerlin

No 459, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: We document a substantial reduction in the wage responsiveness to regional unemployment (the wage curve) in Sweden during the past 25 years. The period is characterized by large changes in the composition of the labor force arising from refugee migration and active labor supply policies targeting marginal workers. During the period, the relationship between regional unemployment and industry demand shocks weakened as the share of immigrants among the unemployed increased from 25 to 60 percent. Simultaneously, a previously stable wage curve disappeared, even though regional wages continued to respond to regional industry demand shocks. The results suggest that wages respond more strongly to unemployment fluctuations that arise from the demand side than the supply side, and that the unemployment rate has become a less informative indicator of resource utilization and inflationary pressure.

Keywords: Wages; Unemployment; Composition (search for similar items in EconPapers)
JEL-codes: E24 J11 J21 J31 R23 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2026-01-01
New Economics Papers: this item is included in nep-lma
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