Summary of “Egalitarianism and Growth”

Hey there folks! Today, I’ll be examining some economic theory from this paper by Jonas Agell and Kjell Erik Lommerud from 1993. It models solidaristic wage bargaining (SWB): the practice by sectoral unions of bargaining pay equality not just within or across firms, but across industries and sectors as well. This practice was especially strong in the height of social democratic power in the Nordics in the 50’s to 80’s, and brought tremendous gains. My own notes will be in brackets [like this]. Let’s get started!

Egalitarianism and Growth

I. Introduction

To quote trade union economist Gösta Rehn, labor is not “like mercury, requiring only small level differences between two areas in order to float quickly, and in large quantities, from one of them to the other”. What that means is labor will not easily flow from old, less productive industries to new, more productive ones in the free market. As such, new industries will need to pay higher wages to attract workers. This leaves old industries at an advantage, because they don’t have to pay these higher wages. We’ll call the difference between these wages the wage premium.

II. The Basic Model

III. Competitive Wage Premia, Growth, and Distribution

IV. Solidaristic Wage Policies

V. Omissions and Extensions

VI. The Demise of the Scandinavian Model?

Economics and welfare knower.