This paper exploits that students at age 16 in Norway are randomly selected into one compulsory exit exam in either mathematics or languages. A few days before the actual exam day, the students are notified about exam subject. The students have an intensive preparation period, and preparation in...

In a theoretical analysis of the properties of different wage setting and financing systems in the local public sector, two financing systems are considered. A benchmark model with local financing through local taxes is compared with a system of centralized financing through grants, where taxes...

The main question in this paper is: Do wages of low-skilled workers in Norwegian local governments adjust to clear the labor market for such workers, or are the wages affected by trade unions comparing their wages with other wages inside the local governments? The main empirical findings are as...

The paper presents empirical results for wage setting in the Norwegian local and central public sector. Our results imply that central and local government wages are completely autonomous processes both in the short-run and in the long-run. This suggests that the formal strong coordination of...

This paper discusses the interaction between the local public sector in an institutional context consistent with a centralized fiscal system. Under decentralized wage setting in the private sector, the effects of shocks in the two sectors depend on whether private and local public goods are...

The paper presents an efficiency wage model where worker effort depends on own wages relative both to wages of other workers in the firm and to similar workers in other firms. First, we show how the Solow conditions are modified if internal comparison effects are at work. Second, we discuss the...