Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192241 
Year of Publication: 
1999
Series/Report no.: 
Discussion Papers No. 259
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
Economic theories of imperfectly competitive labour markets predict that wages are linked to profits. In spite of this, profit variables are not explicitly specified in empirical models of wage formation that otherwise are appealing. Does this mean that theory overplays the role of profitability in wage formation? The answer is probably not: Using Norwegian wage formation as an example, we model the dereminants of profitability within a vector autoregressive model and show that existing wage equations that have been successful empirically in fact contain a close linkage between wage setting and profits.
Subjects: 
Cointegration
incomes policy
profitability
rate-of-return
vector autoregressive model
wage formation.
JEL: 
E2
E64
J31
J51
Document Type: 
Working Paper

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