Wage and Profitability: Norwegian Manufacturing 1967-1998

Roger Bjørnstad () and Ragnar Nymoen ()

Discussion Papers from Statistics Norway, Research Department

Abstract: Economic theories of imperfectly competitive labour markets predict that wages are linked to profits. In spite of this, profit variables are not explicitly specified in empirical models of wage formation that otherwise are appealing. Does this mean that theory overplays the role of profitability in wage formation? The answer is probably not: Using Norwegian wage formation as an example, we model the dereminants of profitability within a vector autoregressive model and show that existing wage equations that have been successful empirically in fact contain a close linkage between wage setting and profits.

Keywords: Cointegration; incomes policy; profitability; rate-of-return; vector autoregressive model; wage formation. (search for similar items in EconPapers)
JEL-codes: E2 E64 J31 J51 (search for similar items in EconPapers)
Date: 1999-08
New Economics Papers: this item is included in nep-lab
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