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Wages, Prices and Politics: Evidence from Norway[Note 1. Comments from an anonymous referee, Eilev Jansen, Oddbjørn Raaum ...]
Author(s) -
Johansen Kåre,
Strøm Bjarne
Publication year - 1997
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.00080
Subject(s) - economics , wage , spillover effect , labour economics , trade union , politics , private sector , social democratic party , government (linguistics) , democracy , efficiency wage , macroeconomics , political science , linguistics , philosophy , law , economic growth
This paper studies the empirical relevance of the close ties between a central trade union and the social democratic political party using time series data for Norway. Using a structural wage‐price model we estimate that changing from a bourgeois to a social democratic government reduces manufacturing wages in the long run by 2.3 percent. This result is consistent with a wage bargaining model augmented by political preferences of the union leaders. Private service wages are not directly affected by government type, but wage spillover effects imply that the long‐run dampening effect in the private service sector is around 2 percent. The results also support the proposition of the Scandinavian model of inflation that the traded goods sector is the wage leader.