Wage Drift and Bargaining: Evidence from Norway.

Empirical equations, based on a theoretical bargaining model, are estimated on data for wage drift in six industries and in the aggregate manufacturing sector in Norway. It is shown that the central wage settlement has a strong impact on aggregate and relative wages in the short run, and that this effect is not offset by wage drift. Wage drift is also found to depend negatively on the size of inventories. This is interpreted as arising from the effect of the initial size of the inventories on the cost to the firm of an industrial conflict. Copyright 1989 by The London School of Economics and Political Science.