Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57962
Year of Publication: 
2012
Series/Report no.: 
CESifo Working Paper No. 3799
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
The paper studies wage and employment determination in the Swedish business sector from the mid-1910s to the late 1930s. This period includes the boom and bust cycle of the early 1920s as well as the Great Depression of the early 1930s. The events of the early 1920s are particularly intriguing, involving inflation running at an annual rate of 30 percent followed by a period of sharp deflation where nominal wages and prices fell by 30 percent and unemployment increased from 5 to 30 percent. We examine whether relatively standard wage and employment equations can account for the volatile economic development during the interwar years. By and large, the answer is a qualified yes. Industry wages were responsive to industry-specific firm performance, suggesting a significant role for insider forces in wage determination. Unemployment had a strong downward impact on wages. There is evidence that reductions in working time added to wage pressure; yet estimates of labor demand equations suggest that cuts in working time may have slightly increased employment as firms substituted workers for hours.
Subjects: 
wage determination
labor demand
interwar labor markets
JEL: 
J23
J31
N14
N34
Document Type: 
Working Paper
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