In a unionized duopoly with price setting firms market shares in different wage determination settings are analyzed. I compare decentralized, centralized and sequential wage determination. In the decentralized setting the union in the more productive firm can exploit the differences in productivity for rising local wages. The rising wages in the more productive firm result in smaller differences of unit costs, therefore the market shares are split more equally in the decentralized setting than with centralized wage determination. Sequential wage determination results in an asymmetric outcome. Compared with the simultaneous case the market share of the wage-leader firm is smaller, because the competitor is able to undercut the wage. Additionally with sequential wage determination the union representing the workers of the more productive firm cannot exploit the productivity advantage by raising the wage rate by the same extent as in the simultaneous case. (author's abstract) / Series: Department of Economics Working Paper Series

A model of two unionized, vertically connected oligopolistic industries is analyzed. Economic performance, measured by consumer prices, depends on the institutional setting of wage bargaining. Two externalities may occur, namely an integration and a competition externality, which have contrary effects. With decentralized bargaining no externalities can be internalized resulting in low consumer prices. With bargaining at the industry level only the competition externality is internalized resulting in high prices. With centralized bargaining both externalities can be internalized resulting again in low prices. With at least two firms in each industry, the decentralized setting performs best. Performance improves with an increase in the competition of the product markets. (author's abstract) / Series: Working Papers Series "Growth and Employment in Europe: Sustainability and Competitiveness"

There is at the present time a need for a great deal more study regarding the way in which wage payments are determined. Are wages determined or fixed by natural law? Or are they administered through the conscious effort of man? It will be the purpose of this study to partially investigate the determination of wages both theoretical and actual. Perhaps some insight may be gained that will give rough answers to the above questions.

<p>Study I<i>Real Wage Determination in the Swedish Engineering Industry</i></p><p>This study uses the monopoly union model to examine the determination of real wages and in particular the effects of active labour market programmes (ALMPs) on real wages in the engineering industry. Quarterly data for the period 1970:1 to 1996:4 are used in a cointegration framework, utilising the Johansen's maximum likelihood procedure. On a basis of the Johansen (trace) test results, vector error correction (VEC) models are created in order to model the determination of real wages in the engineering industry. The estimation results support the presence of a long-run wage-raising effect to rises in the labour productivity, in the tax wedge, in the alternative real consumer wage and in real UI benefits. The estimation results also support the presence of a long-run wage-raising effect due to positive changes in the participation rates regarding ALMPs, relief jobs and labour market training. This could be interpreted as meaning that the possibility of being a participant in an ALMP increases the utility for workers of not being employed in the industry, which in turn could increase real wages in the industry in the long run. Finally, the estimation results show evidence of a long-run wage-reducing effect due to positive changes in the unemployment rate.</p><p>Study II<i>Intersectoral Wage Linkages in Sweden</i></p><p>The purpose of this study is to investigate whether the wage-setting in certain sectors of the Swedish economy affects the wage-setting in other sectors. The theoretical background is the Scandinavian model of inflation, which states that the wage-setting in the sectors exposed to international competition affects the wage-setting in the sheltered sectors of the economy. The Johansen maximum likelihood cointegration approach is applied to quarterly data on Swedish sector wages for the period 1980:1–2002:2. Different vector error correction (VEC) models are created, based on assumptions as to which sectors are exposed to international competition and which are not. The adaptability of wages between sectors is then tested by imposing restrictions on the estimated VEC models. Finally, Granger causality tests are performed in the different restricted/unrestricted VEC models to test for sector wage leadership. The empirical results indicate considerable adaptability in wages as between manufacturing, construction, the wholesale and retail trade, the central government sector and the municipalities and county councils sector. This is consistent with the assumptions of the Scandinavian model. Further, the empirical results indicate a low level of adaptability in wages as between the financial sector and manufacturing, and between the financial sector and the two public sectors. The Granger causality tests provide strong evidence for the presence of intersectoral wage causality, but no evidence of a wage-leading role in line with the assumptions of the Scandinavian model for any of the sectors. </p><p>Study III<i>Wage and Price Determination in the Private Sector in Sweden</i></p><p>The purpose of this study is to analyse wage and price determination in the private sector in Sweden during the period 1980–2003. The theoretical background is a variant of the “Imperfect competition model of inflation”, which assumes imperfect competition in the labour and product markets. According to the model wages and prices are determined as a result of a “battle of mark-ups” between trade unions and firms. The Johansen maximum likelihood cointegration approach is applied to quarterly Swedish data on consumer prices, import prices, private-sector nominal wages, private-sector labour productivity and the total unemployment rate for the period 1980:1–2003:3. The chosen cointegration rank of the estimated vector error correction (VEC) model is two. Thus, two cointegration relations are assumed: one for private-sector nominal wage determination and one for consumer price determination. </p><p>The estimation results indicate that an increase of consumer prices by one per cent lifts private-sector nominal wages by 0.8 per cent. Furthermore, an increase of private-sector nominal wages by one per cent increases consumer prices by one per cent. An increase of one percentage point in the total unemployment rate reduces private-sector nominal wages by about 4.5 per cent. The long-run effects of private-sector labour productivity and import prices on consumer prices are about –1.2 and 0.3 per cent, respectively. The Rehnberg agreement during 1991–92 and the monetary policy shift in 1993 affected the determination of private-sector nominal wages, private-sector labour productivity, import prices and the total unemployment rate. The “offensive” devaluation of the Swedish krona by 16 per cent in 1982:4, and the start of a floating Swedish krona and the substantial depreciation of the krona at this time affected the determination of import prices.</p>

Study IReal Wage Determination in the Swedish Engineering Industry This study uses the monopoly union model to examine the determination of real wages and in particular the effects of active labour market programmes (ALMPs) on real wages in the engineering industry. Quarterly data for the period 1970:1 to 1996:4 are used in a cointegration framework, utilising the Johansen's maximum likelihood procedure. On a basis of the Johansen (trace) test results, vector error correction (VEC) models are created in order to model the determination of real wages in the engineering industry. The estimation results support the presence of a long-run wage-raising effect to rises in the labour productivity, in the tax wedge, in the alternative real consumer wage and in real UI benefits. The estimation results also support the presence of a long-run wage-raising effect due to positive changes in the participation rates regarding ALMPs, relief jobs and labour market training. This could be interpreted as meaning that the possibility of being a participant in an ALMP increases the utility for workers of not being employed in the industry, which in turn could increase real wages in the industry in the long run. Finally, the estimation results show evidence of a long-run wage-reducing effect due to positive changes in the unemployment rate. Study IIIntersectoral Wage Linkages in Sweden The purpose of this study is to investigate whether the wage-setting in certain sectors of the Swedish economy affects the wage-setting in other sectors. The theoretical background is the Scandinavian model of inflation, which states that the wage-setting in the sectors exposed to international competition affects the wage-setting in the sheltered sectors of the economy. The Johansen maximum likelihood cointegration approach is applied to quarterly data on Swedish sector wages for the period 1980:1–2002:2. Different vector error correction (VEC) models are created, based on assumptions as to which sectors are exposed to international competition and which are not. The adaptability of wages between sectors is then tested by imposing restrictions on the estimated VEC models. Finally, Granger causality tests are performed in the different restricted/unrestricted VEC models to test for sector wage leadership. The empirical results indicate considerable adaptability in wages as between manufacturing, construction, the wholesale and retail trade, the central government sector and the municipalities and county councils sector. This is consistent with the assumptions of the Scandinavian model. Further, the empirical results indicate a low level of adaptability in wages as between the financial sector and manufacturing, and between the financial sector and the two public sectors. The Granger causality tests provide strong evidence for the presence of intersectoral wage causality, but no evidence of a wage-leading role in line with the assumptions of the Scandinavian model for any of the sectors. Study IIIWage and Price Determination in the Private Sector in Sweden The purpose of this study is to analyse wage and price determination in the private sector in Sweden during the period 1980–2003. The theoretical background is a variant of the “Imperfect competition model of inflation”, which assumes imperfect competition in the labour and product markets. According to the model wages and prices are determined as a result of a “battle of mark-ups” between trade unions and firms. The Johansen maximum likelihood cointegration approach is applied to quarterly Swedish data on consumer prices, import prices, private-sector nominal wages, private-sector labour productivity and the total unemployment rate for the period 1980:1–2003:3. The chosen cointegration rank of the estimated vector error correction (VEC) model is two. Thus, two cointegration relations are assumed: one for private-sector nominal wage determination and one for consumer price determination. The estimation results indicate that an increase of consumer prices by one per cent lifts private-sector nominal wages by 0.8 per cent. Furthermore, an increase of private-sector nominal wages by one per cent increases consumer prices by one per cent. An increase of one percentage point in the total unemployment rate reduces private-sector nominal wages by about 4.5 per cent. The long-run effects of private-sector labour productivity and import prices on consumer prices are about –1.2 and 0.3 per cent, respectively. The Rehnberg agreement during 1991–92 and the monetary policy shift in 1993 affected the determination of private-sector nominal wages, private-sector labour productivity, import prices and the total unemployment rate. The “offensive” devaluation of the Swedish krona by 16 per cent in 1982:4, and the start of a floating Swedish krona and the substantial depreciation of the krona at this time affected the determination of import prices.

This dissertation consists of two essays concerning the determination of wages across areas. The first essay investigates the equilibrium relationship between wages and prices across labor markets. Of central interest is the extent to which workers receive higher wages to compensate for differences in the cost of living. According to the spatial equilibrium hypothesis, the utility of homogenous workers should be equal across labor markets. This implies that controlling for amenity differences across areas, the elasticity between wages and the general price level across areas should equal one, at least under certain conditions. We test this hypothesis and find that the predicted relationship holds when housing prices are measured by rents and the general price level is instrumented to account for measurement error. When housing prices are measured by housing values, however, the wage-price elasticity is significantly less than one, even using instrumental variables. Rents reflect the price paid for housing per unit of time and are arguably the superior measure. Thus, findings in this essay provide support for the full compensation hypothesis. These findings also have important implications for researchers estimating the implicit prices of amenities or ranking the quality of life across areas. The second essay uses a national level dataset and a spatial econometric framework to examine the effects of teacher unions and other school district characteristics on teacher salaries. The results confirm that salaries for both experienced and beginning teachers are positively affected by salaries in nearby districts. Investigations of the determinants of teacher salaries that ignore this spatial relationship are likely to be misspecified. We find that union activity increases salaries for experienced teachers by as much as 16-21 percent but increases salaries for beginning teachers by a considerably smaller amount. This result is consistent with predictions from a median voter model.

In Folge der Osterweiterung der europäischen Union (EU) und der steigenden Arbeitsmarktintegration zwischen den EU15 und den neuen Mitgliedsstaaten ist die Lohnfindung in Mittel- und Osteuropa zu einem Schwerpunkt der europäischer Wirtschaftspolitik geworden. Zugleich wird das optimale Wechselkursregime für mittel- und osteuropäische Staaten kontrovers diskutiert. Die Dissertation befasst sich mit der Fragestellung, welche Wechselkursstrategie in Mittel- und Osteuropa vorzuziehen ist, um zum einen den Lohnfindungsprozess zu optimieren und zum anderen den Anpassungsprozess (Konvergenzprozess) an europäische Lohnstandards zu beschleunigen. Diese kumulierte Arbeit besteht aus vier unabhängigen Fachaufsätzen. Zuerst wird der Frage nachgegangen, welche Wechselkursstrategie einen optimalen Rahmen für die Lohnsetzung während des Aufholprozesses mittel- und osteuropäischer Staaten ermöglicht (Kapitel zwei). Im Kapitel drei wird die Rolle der Geldpolitik in Bezug auf die Lohnfindung in Staaten mit flexiblen Wechselkursen untersucht. Die Evaluierung der Prognosefähigkeit alternativer Konjunkturindikatoren für die Euro Zone sowie deren Implikationen für den Lohnverhandlungsprozess in Mittel-und Osteuropa ist Gegenstand der Analyse in Kapitel vier. Im fünften Kapitel wird der Rolle der Lohnpolitik auf Leistungsbilanz(un)gleichgewichte in Mittel- und Osteuropa nachgegangen. / After the Eastern enlargement of the European Union (EU) and increasing participation of labor between the EU15 and the new member states, wage determination in Central and Eastern Europe (CEE) has become a key issue in European economic policy making. At the same time there are controversial discussions regarding the appropriate exchange rate regime for the CEE countries. In this thesis it is examined which exchange rate strategy provides a more favorable framework for wage setting in CEE and leads to faster wage convergence in Europe. This thesis has four parts. First, it is analyzed which exchange rate strategy provides a more favorable framework for wage setting during the economic catch-up process of CEE (section two). Second, the role of monetary policy in wage determination in countries with flexible exchange rate regimes is examined in section three. Third, the predictive power of different euro area business cycle indicators is analyzed in section four. Fourth, the impact of wage determination on the balance of payments in CEE is scrutinized (section five).

Diss. (sammanfattning) Stockholm : Stockholms universitet, 2004. / Härtill 3 uppsatser.

In Folge der Osterweiterung der europäischen Union (EU) und der steigenden Arbeitsmarktintegration zwischen den EU15 und den neuen Mitgliedsstaaten ist die Lohnfindung in Mittel- und Osteuropa zu einem Schwerpunkt der europäischer Wirtschaftspolitik geworden. Zugleich wird das optimale Wechselkursregime für mittel- und osteuropäische Staaten kontrovers diskutiert. Die Dissertation befasst sich mit der Fragestellung, welche Wechselkursstrategie in Mittel- und Osteuropa vorzuziehen ist, um zum einen den Lohnfindungsprozess zu optimieren und zum anderen den Anpassungsprozess (Konvergenzprozess) an europäische Lohnstandards zu beschleunigen. Diese kumulierte Arbeit besteht aus vier unabhängigen Fachaufsätzen. Zuerst wird der Frage nachgegangen, welche Wechselkursstrategie einen optimalen Rahmen für die Lohnsetzung während des Aufholprozesses mittel- und osteuropäischer Staaten ermöglicht (Kapitel zwei). Im Kapitel drei wird die Rolle der Geldpolitik in Bezug auf die Lohnfindung in Staaten mit flexiblen Wechselkursen untersucht. Die Evaluierung der Prognosefähigkeit alternativer Konjunkturindikatoren für die Euro Zone sowie deren Implikationen für den Lohnverhandlungsprozess in Mittel-und Osteuropa ist Gegenstand der Analyse in Kapitel vier. Im fünften Kapitel wird der Rolle der Lohnpolitik auf Leistungsbilanz(un)gleichgewichte in Mittel- und Osteuropa nachgegangen. / After the Eastern enlargement of the European Union (EU) and increasing participation of labor between the EU15 and the new member states, wage determination in Central and Eastern Europe (CEE) has become a key issue in European economic policy making. At the same time there are controversial discussions regarding the appropriate exchange rate regime for the CEE countries. In this thesis it is examined which exchange rate strategy provides a more favorable framework for wage setting in CEE and leads to faster wage convergence in Europe. This thesis has four parts. First, it is analyzed which exchange rate strategy provides a more favorable framework for wage setting during the economic catch-up process of CEE (section two). Second, the role of monetary policy in wage determination in countries with flexible exchange rate regimes is examined in section three. Third, the predictive power of different euro area business cycle indicators is analyzed in section four. Fourth, the impact of wage determination on the balance of payments in CEE is scrutinized (section five).

The thesis is created as a brief economic and legal guide to the process of work performance. Comprising of legal assurance of the process and specific instruments for each stage, it focuses mainly on resolving low performance of workers in organization and creating an efficient rewards system within the legal boundaries of czech law system. Each phase of the process, including goal setting and monitoring is described considering all the economic and legal aspects.