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Decentralisation of bargaining and manufacturing employment: Sweden 1970-96

Author: Anders Forslund, And Thomas Lindh, And

Summary of Working paper 2004:3

 

Swedish unemployment was very low up to the early 1990s when
it rose rapidly. At the same time manufacturing employment fell
by more than 20 %. The decentralisation of wage bargaining that
started in 1983 may have contributed to this by making employment
more shock sensitive or by increasing wage mark-ups. In Swedish
plant-level data for manufacturing 1970–96 relatively less employ-
ment is in low-productivity plants after decentralisation than before,
but the correlation between industry wage costs and productivity be-
comes stronger. Our conclusion is that decentralisation of bargaining
in Sweden has not allowed more low-productivity plants in manufac-
turing to survive. On the contrary, the evidence indicates that a
higher wage mark-up may have resulted from the decentralisation.
This would weed out low-productivity plants and decrease manufac-
turing employment.
JEL codes: E24, J31, L60
Keywords: Manufacturing employment, bargaining institutions, in-
dustry structure

Swedish unemployment was very low up to the early 1990s when it rose rapidly. At the same time manufacturing employment fell by more than 20 %. The decentralisation of wage bargaining that started in 1983 may have contributed to this by making employment more shock sensitive or by increasing wage mark-ups. In Swedish plant-level data for manufacturing 1970–96 relatively less employment is in low-productivity plants after decentralisation than before, but the correlation between industry wage costs and productivity becomes stronger. Our conclusion is that decentralisation of bargaining in Sweden has not allowed more low-productivity plants in manufacturing to survive. On the contrary, the evidence indicates that a higher wage mark-up may have resulted from the decentralisation. This would weed out low-productivity plants and decrease manufacturing employment.

Keywords: Manufacturing employment, bargaining institutions, industry structure
JEL codes: E24, J31, L60

Research areas