Centralized versus decentralized wage bargaining: The Swedish experience

Abstract

In this study we examine the role of unions in collective centralized and decentralized wage bargaining systems. Using Sweden as our example, we examine the macroeconomic implications of each level of bargaining and attempt to determine the most advantageous wage-setting scheme in promoting economic growth and low unemployment. Wage drift and structural changes are some of the factors that have caused a general shift from centralized to decentralized bargaining in Sweden. The study also weighs the benefits and repercussions of collective bargaining on individual states after the introduction of the EMU and the ECB. No definite conclusion was reached on whether fully centralized or decentralized wage bargaining is more conducive to economic expansion, but high unemployment and inflationary pressures are forcing countries to make a decision.