Wages and unemployment in the Nordic countries: Is there a connection?

The article explores the existence of a wage curve a la Blanchflower and Oswald in the Nordic countries. More specifically, the impact of unemployment rates on wages is analysed using large micro-level data sets. The results indicate that there exists a strong negative relationship between individual wages and regional unemployment but only in the long run; the degree of wage flexibility is negligible in the short run. These findings conflict strongly with those obtained for the UK and the US but are in line with results obtained for Italy. The institutional settings in the labour market thus turn out to play a decisive role also in this respect.