Against the Wind: Bargaining Recentralisation and Wage Inequality in Norway 1987–91

In the late 1980s, Norway's labor market experienced similar supply and demand shifts for skills to other countries but, unlike other OECD nations, Norway's wage setting system became more centralized. The pay distribution in Norway became more compressed at the bottom from 1987 to 1991, while low wage workers in other countries lost ground relatively. Using Norwegian microdata for 1987 and 1991, the author found that changing labor market prices helped cause this wage compression. Further, the less educated had declining relative overall employment but increasing relative public sector employment, both possible labor market responses to the wage compression.