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Labour and the ‘law of one price’ : regional wage convergence of farm workers in Sweden, 1757–1980

Prado, Svante ; Lundh, Christer ; Collin, Kristoffer and Enflo, Kerstin LU (2020) In Scandinavian Economic History Review
Abstract
Economic theory predicts that differences in wages for workers with similar skills will decline as labour mobility increase. This prediction is reminiscent of the ‘law of one price’, the notion that markets, if unfettered, eliminates price differentials of similar commodities across space. But can we really apply the economic logic of the commodity market to the labour market, governed as it is by institutions and politics as well as market forces? In this paper, we have examined the spread in farm workers’ wages across Swedish counties in 1757–1980. Besides nominal wages, the paper also offers cost of living indices by county. The paper enquires into sigma convergence and beta convergence. Long-run convergence, by both measures, was... (More)
Economic theory predicts that differences in wages for workers with similar skills will decline as labour mobility increase. This prediction is reminiscent of the ‘law of one price’, the notion that markets, if unfettered, eliminates price differentials of similar commodities across space. But can we really apply the economic logic of the commodity market to the labour market, governed as it is by institutions and politics as well as market forces? In this paper, we have examined the spread in farm workers’ wages across Swedish counties in 1757–1980. Besides nominal wages, the paper also offers cost of living indices by county. The paper enquires into sigma convergence and beta convergence. Long-run convergence, by both measures, was massive; the coefficient of variation, for instance, declined from about 28 per cent in the mid-eighteenth century to 4 per cent in 1980. Most of the compression, though, occurred in brief episodes rather than continuously. Markets, through labour mobility and trade, and institutions, through collective actions and labour laws, took turns in pushing towards regional convergence. The ‘law of one price’, we conclude, was not singlehandedly responsible for the elimination of regional wage differentials. (Less)
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author
; ; and
organization
publishing date
type
Contribution to journal
publication status
epub
subject
keywords
Law of one price, regional wage convergence,, farm workers, labour market institutions, Sweden
in
Scandinavian Economic History Review
publisher
Routledge
external identifiers
  • scopus:85082965081
ISSN
1750-2837
DOI
10.1080/03585522.2020.1740776
language
English
LU publication?
yes
id
dfbdabdf-ce25-46de-b3de-4d45506751c3
date added to LUP
2020-03-25 13:01:55
date last changed
2020-05-10 06:41:57
@article{dfbdabdf-ce25-46de-b3de-4d45506751c3,
  abstract     = {Economic theory predicts that differences in wages for workers with similar skills will decline as labour mobility increase. This prediction is reminiscent of the ‘law of one price’, the notion that markets, if unfettered, eliminates price differentials of similar commodities across space. But can we really apply the economic logic of the commodity market to the labour market, governed as it is by institutions and politics as well as market forces? In this paper, we have examined the spread in farm workers’ wages across Swedish counties in 1757–1980. Besides nominal wages, the paper also offers cost of living indices by county. The paper enquires into sigma convergence and beta convergence. Long-run convergence, by both measures, was massive; the coefficient of variation, for instance, declined from about 28 per cent in the mid-eighteenth century to 4 per cent in 1980. Most of the compression, though, occurred in brief episodes rather than continuously. Markets, through labour mobility and trade, and institutions, through collective actions and labour laws, took turns in pushing towards regional convergence. The ‘law of one price’, we conclude, was not singlehandedly responsible for the elimination of regional wage differentials.},
  author       = {Prado, Svante and Lundh, Christer and Collin, Kristoffer and Enflo, Kerstin},
  issn         = {1750-2837},
  language     = {eng},
  month        = {03},
  publisher    = {Routledge},
  series       = {Scandinavian Economic History Review},
  title        = {Labour and the ‘law of one price’ : regional wage convergence of farm workers in Sweden, 1757–1980},
  url          = {http://dx.doi.org/10.1080/03585522.2020.1740776},
  doi          = {10.1080/03585522.2020.1740776},
  year         = {2020},
}