Is the Swedish Central Government a Wage Leader?

Is the Swedish central government a wage leader? This question is studied empirically in a vector error-correction model using a unique, high quality data set. Private sector salaries are found to be weakly exogenous to the system of equations. This means that the private sector is the wage leader in the long-run model. We also find that salaries in these two sectors do not converge to a common salary in the long-run and that changes in central government salaries do not Granger cause changes in private sector salaries. Together, these findings clearly demonstrate that the central government is not placing undue pressure on salaries in the private sector. The central government is not acting as a wage leader.