Julián Messina, Oskar Nordström Skans, Mikael Carlsson, 23 October 2016

While standard microeconomic theory suggests that firms have no power over setting wages when markets are perfectly competitive, this view obviously clashes with the perceptions of the casual observer. This column uses data from Sweden to investigate the extent to which differences in firms’ pay are related to differences in physical productivity. It finds that firms that benefit from positive productivity shocks increase the wages of incumbent workers, and in particular firms among which there is substantial labour mobility. The evolution of productivity among such firms appears to be a crucial determinant of workers’ wages.

Suresh Naidu, Noam Yuchtman, 23 August 2016

Today’s labour market in the US has much in common with that of the late 19th and early 20th centuries. Then, as now, there were few government protections for workers, fears over cheap immigrant labour, rapid technological change, and increasing market concentration. This column explores the lessons that can be drawn from the earlier ‘Gilded Age’. The findings suggests that even as markets play a greater role in allocating labour, legal and political institutions will continue to shape bargaining power between firms and workers.

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