Regional wages and labour market integration in Sweden, 1732–2009

Abstract

This dissertation consists of an introduction, four research papers and two papers that describe the data collected. Three county-specific data sets were constructed: one wage data set for the manufacturing sector, one wage data set for the agricultural sector, and one cost-of-living data set. The four research papers examine regional wage dispersion and labour market integration. Paper 1 explores regional wage dispersion in the Swedish manufacturing sector between 1860 and 2009. It shows a long-term tendency of convergence, interrupted by a brief spell of divergence in the period 1913–1931, and by stability after the early 1980s. Regional changes in the share of workers employed in industry played a minor role in this development. Instead, regional wage compression resulted from the catch-up between low-wage and high-wage regions. Paper 2 investigates the regional wage convergence of farm workers in Sweden between 1732 and 1980. Mainstream economic theory predicts that labour market outcomes will converge as transports and communication technologies increase labour mobility. This paper shows that regional wage dispersion declined from about 40 per cent to 4 per cent. Convergence characterised the era up to the Napoleonic wars; the period that followed was marked by quite stable wage dispersion. Industrialisation set in motion a new wave of convergence, also temporarily interrupted by the turmoil during the First World War and the deflation in the early 1920s. Paper 3 examines regional wage gaps between agricultural and manufacturing workers from 1860 to 1945. Previous research has mostly looked into aggregated wage differences between urban and rural workers. This paper shows large variations in wage gaps across regions and time. Geographical patterns prevailed during the widening of the wage gaps between the First World War and the early 1930s, as a result of different labour market responses to economic crises and wars. Regional wages between agricultural and manufacturing workers show a weak positive association until the Second World War, when it became negative, thus indicating regional disintegration. Paper 4 focuses on regional specialisation and the wage structure during the early industrialisation years, from 1860 to 1879. This paper employs regional industry-specific wages and employment data, yielding results that differ from those presented by other researchers. The results presented here show a more compressed inter-industry wage structure. A decomposition of the wage structure shows a shift from within-region to between-region factors, suggesting that regional specialisation played an important role in the wage structure. This dissertation provides new evidence of the long-term movement of regional wages in Sweden. The regional wages and cost-of-living series presented here capture wide time spans and make an important empirical contribution for future research into wages and prices.