European Economy. Economic Papers
Klas Fregert (Department of Economics University of Lund, Sweden) and Lars Jonung (Directorate-General for Economic and Financial Affairs)
Policy rule evaluation by contract-makers: 100 years of wage contract length in Sweden - Klas Fregert and Lars Jonung (274 kB)
(European Economy. Economic Papers. 270. January 2007.
Brussels. 34pp. Tab. 34.)
KC-AI-06-270-EN-C ISBN: 92-79-03846-X ISSN: 1725-3187
The length of collective wage agreements in Sweden between 1908 and 2005 is explored to evaluate a variety of policy regimes from the wage contract-makers’ perspective. Adopting a new long-run test, it is found that wage contract length decreases in response to an increase in ”macroeconomic uncertainty” across policy regimes. There is also substantial short-run variation in contract length, which cautions against regime divisions based solely on the policy rule. The inflation targeting regime 1995-2005 stands out as an exceptionally stable policy regime as judged by the willingness of contract-makers to repeatedly commit to three-year non-indexed wage agreements. The results are based on a data base on collective wage agreements unique in international comparisons in terms of length and coverage.