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Abstract 6/26/2019 Decentralization of wage determination

Despite a global trend of wage decentralization over the past 30 years, we know very little about the labor market implications of decentralized wage determination. A main reason is the lack of exogenous variation in wage regulation linked to detailed outcome data. Using Swedish registry data and exploiting a reform that replaced the fixed national pay scale for teachers with individual wage bargaining, I overcome these issues and provide new evidence on the labor market effects of wage decentralization. The paper presents three sets of empirical results. First, I show that the reform significantly changed the wage structure of teachers. Second, I demonstrate that these wage changes did not affect teacher composition or student outcomes. Finally, I find support for a wage spillover effect to substitute occupations, providing evidence on the dynamics of wage determination across occupations. I argue that the wage spillover effect coupled with the compressed Swedish wage structure likely explains the lack of effects on teacher and student outcomes.

Keywords: I20, I28, J31, J45
JEL-codes: Wage Regulation, Decentralization, Teacher Labor Market

Contactinformation

 Working paper 2019:17 is written by Alexander Willén,
Assistant professor of Economics, Norwegian School of Economics (NHH)
Phone: +47 41238490
E-mail: alexander.willen@nhh.no

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Published by:

Sofia Malmer

Published:

6/26/2019