Wage Indexation, the Scandinavian Model and Macroeconomic Stability

• The article analyzes wage indexation in an open economy as a means of promoting macroeconomic stability in the case of domestic demand and foreign price shocks. Employment can be stabilized by linking wages to an index of both traded and non-traded goods. But this index is not likely to coincide with the producer or the consumer price index. A "Scandinavian" wage indexation-linking wages to the price of traded goods only as in the Scandinavian model of wage formation - minimizes the effects in the trade balance but does this at the cost of variations in total employment.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Economics

Nationalekonomi

Publication and Content Type

vet (subject category)

rap (subject category)