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This paper has benefited from comments by Lars Calmfors, Sharmini Coorey, Ragnar Nymoen, Eswar Prasad, Ramana Ramaswamy, and colleagues in the EU1 Department.
The timing of the move to more decentralized bargaining in Finland appears to be 1993 (rather than before 1990 as suggested by the OECD) when, for the first time wage, negotiations were conducted entirely on the sectoral level.
This is not captured in the OECD presentation because it indicates no change in the nature of wage bargaining during the 1990s although it recognizes that wage negotiations became more coordinated over this period.
The replacement rate is not included in the initial specification to facilitate comparisons with the earlier literature which excluded this variable because it was not available.
For Norway, a cointegrating relationship could not be identified between the nominal wage, the price level and the real level of productivity but one was found between the wage and nominal productivity.
The tax variables were eliminated for all countries except Finland, France, Norway, and Sweden, because they were insignificant.
Time-series on the replacement rate across countries has recently been made available by the OECD. The measure is based on averaging the replacement rate in years 1, 2-3, and 4-5. Blanchard and Wolfers note that averaging the estimate over such a long period has drawbacks because, given the exit rate from unemployment, it is unlikely that the generosity of benefits in year 4 and 5 would play much of a role in wage formation. Estimates of expenditures on ALMPs have been published annually by the OECD since 1986.
The finding that internal factors are important in France is consistent with the work of Cahuc et al. who demonstrate that the bargaining power of workers in France (defined as the weight attached to the expected revenue of the worker) is low and comparable to that found for Canada.