Real and nominal wage adjustment in open economies

Anders Forslund (), Nils Gottfries () and Andreas Westermark

No 2005:23, Working Paper Series from IFAU - Institute for Evaluation of Labour Market and Education Policy

Abstract: How are wages set in an open economy? What role is played by demand pressure, international competition, and structural factors in the labour market? How important is nominal wage rigidity and exchange rate policy for the medium term evolution of real wages and competitiveness? To answer these questions, we formulate a theoretical model of wage bargaining in an open economy and use it to derive a simple wage equation where all parameters have clear economic interpretations. We estimate the wage equation on data for aggregate manufacturing wages in Denmark, Finland, Norway, and Sweden from the mid 1960s to the mid 1990s.

Keywords: Wage formation; efficiency wage; turnover; bargaining; rent sharing; nominal wage rigidity; exchange rate policy; competitiveness (search for similar items in EconPapers)
JEL-codes: E52 F33 F41 J31 J51 J63 J64 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2005-12-05
New Economics Papers: this item is included in nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Real and Nominal Wage Adjustment in Open Economies (2006)
Working Paper: Real and Nominal Wage Adjustment in Open Economies (2005)
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