The Nordic Development and Growth Models: The Riddle is Still There but We May be a Little Bit Wiser

The Nordic countries are often bundled together, as representatives of a ‘model’ which combines high living standards and an open market economy with social insurance and ambitious public services. Yet, the economic and political development of Denmark, Finland, Norway and Sweden towards this model has taken quite different roads. Sweden’s economic development from the late nineteenth century onwards can be seen as a rather spontaneous industrial breakthrough, whereas the state has in both Norway and Finland assumed a more active and interventionist role in mobilizing resources and managing natural endowments. However, the four countries are quite similar in their acceptance of the market economy, technical progress and economic openness, coupled with a pursuit of equality and a state that has alleviated resistance to change by signalling a will to share the gains and losses due to structural change.Nordic economic development

A conflict-free arbitration scheme in a large population

This paper studies allocations that can be implemented by an arbitrator subject to the constraint that the agents' outside option is to start bargaining by themselves. As the population becomes large, the set of implementable allocations shrinks to a singleton point - the conflict-free allocation. Finally, the conflict-free allocation can be implemented via a simple "lobbying" game where parties composed of agents with similar preferences bid for the right to be the first proposer in a bargaining game among the parties, i.e. in the "political game".non-cooperative bargaining, arbitration, implementation

Auction Design without Commitment

We study auction design when parties cannot commit themselves to the mechanism. The seller may change the rules of the game and the buyers choose their outside option at all stages. We assume that the seller has a leading role in equilibrium selection at any stage of the game. Stationary equilibria are characterized in the language of vonNeumann-Morgenstern stable sets. This simplifies the analysis remarkably. In the one buyer case, we obtain the Coase conjecture: the buyer obtains all the surplus and efficiency is reached. However, in the multiple buyer case the seller can achieve more: she is able to commit to the English auction. Typically the converse also holds, the English auction is the only stable auction mechanism.Auction theory, commitment, stable sets

Job Assignment and the Gender Wage Differential: Theory and Evidence on Finnish Metalworkers

We study the determinants of the gender wage differential by using a data set on Finnish blue-collar metalworkers. The assignment of men and women into jobs of different complexity is a key factor that widens the final wage differential. Using the theory of optimal job assignment, we propose a model of individual productivity, ability and job complexity and formulate a hypothesis of asymmetric assignment according to which men and women of equal ability are allocated to different job levels. Using econometric panel data techniques, we find support for this hypothesis. The results are consistent with the Lazear-Rosen model of job ladders but can alternatively be interpreted as evidence for gender discrimination in job assignment.Wage Differentials; Labor-Management Relations; Discrimination

Dynamic stable set

We study a dynamic vNM stable set in a compact metric space under the assumption of complete and continuous dominance relation. Internal and external stability are defined with respect to farsighted dominance. Stability of an outcome is conditioned on the history via which it is reached. A dynamic stable set always exists. Any covering set by Dutta (1988) coincides with the set of outcomes that are implementable via a dynamic stable set. The maximal implementable outcome set is a version of the ultimate uncovered set.vNM stable set, dynamic, history

Relative Wages in Monetary Union and Floating

We analyse a small open economy with a tradable and a sheltered sector. If the unions that operate in each sector coordinate their wage demands sectorwise, the choice of monetary regime - floating cum inflation target vs EMU - may affect the relative wages and prices of the economy. We show that EMU results in lower prices for tradable goods and lower real wages in the traded sector while opposite results hold for sheltered sector prices and wages. Thus, if large unions behave strategically, the choice of monetary regime has far-reaching structural implications.Trade unions; Wage bargaining; EMU; Monetary policy

One-deviation principle in coalition formation

We study coalitional one-deviation principle in a framework a la Chwe (1994). The principle requires that an active coalition or any of its subcoalition will not benefit from a single deviation to a strategy that specifies, for each history of coalitional moves, an active coalition and its move. A strategy meeting the one-deviation property is characterized. Moreover, it is shown to exist. Finally, the results are compared to the existing theories of coalitional games.one-deviation principle, coalition formation

Auction Design without Commitment

We study auction design when parties cannot commit to the mechanism. The seller may change the rules of the game any number of times and the buyers may choose their outside option at any stage of the game. A dynamic consistency condition and an optimality condition property are defined to characterize the seller's mechanism selection behavior. The unique stationary mechanism selection rule that meets the conditions is the English auction.auctions, commitment, consistency, one-deviation property, stationarity

Interpreting Wage Bargaining Norms

From the mid-1990s onwards, Swedish wage bargaining has been characterised by informal co-ordination of the wage claims of big unions and bargaining cartels. In particular, it has been understood that the manufacturing sector should lead by first agreeing on a pay increase, whereafter the service sector and public sector unions choose a similar increase. We analyse his setup with two possible theoretical interpretations: (i) the manufacturing sector as a tackelberg leader and (ii) a normative role for the manufacturing sector’s pay increase, upported either by unmodelled social pressure or a modeled loss aversion (envy) of the heltered sector unions. The conclusion of the analysis is that the normative or leading role of one sector – in the Swedish case the manufacturing sector – can potentially bring big benefits for employment and output. Generalising an idea suggested by Lars Calmfors and Anna Larsson, our analysis also generates a rudimentary theory of why the wage increase norm sometimes binds and sometimes not. A comparison of the model predictions and the observed outcomes of the last five wage bargaining rounds in Sweden suggests that the model is generally consistent with the empirical observations: wage moderation and norm observance are stronger when the manufacturing industry’s initial relative wage is low.wage bargaining; bargaining co-ordination