Bargaining, Capital Formation and Unemployment: A Putty-Clay Approach

Anders Forslund () and Thomas Lindh

No 1997:18, Working Paper Series from Uppsala University, Department of Economics

Abstract: Swedish unemployment was very low up to the early 1990s when it rose rapidly. Theoretically, decentralisation of wage bargaining in the 1980s might have allowed low-productivity firms to survive or increased wage mark-ups, making employment more sensitive to shocks. In Swedish plant-level data for manufacturing 1968-1992 relatively less employment is in low-productivity plants after decentralisation than before, but a positive correlation emerges between industry wage costs and productivity. A putty-clay model with bargaining explains a puzzling desynchronisation between real wage and productivity growth and indicates the decentralisation might have increased the wage mark-up.

Keywords: Unemployment; bargaining institutions; putty-clay production (search for similar items in EconPapers)
JEL-codes: J23 J31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 1997-08-29
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Citations: View citations in EconPapers (1)

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Working Paper: Bargaining, Capital Formation and Unemployment: A Putty-Clay Approach (1997)
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