A Theoretical, Empirical and Experimental Analysis of Wage Formation, Bargaining Behaviour and Risk

Project leader

Funding source

Riksbankens Jubileumsfond (RJ)

Project Details

Start date: 01/01/2011
Funding: 1500000 SEK


Swedish wage setting has recently undergone a large change by shifting towards a more decentralised wage-setting practice resulting in individual wage bargaining having a more pronounced role. Although there is a large literature on wage bargaining and wage formation the role of wage-requests is little explored, both theoretically and empirically. Yet, what it seems in job ads, wage requests are wanted by some employers, but not by some. Using three methods, this research project explores the role of wage requests in the hiring process both from the perspective of the employer and the employee. Not only are the theoretical underpinnings of a wage request not explored, but the literature lacks a systematic empirical characterization of which employers initiate bargaining in the hiring process versus use wage posting. Moreover, the incentives driving the applicant's wage request are also unexplored, especially in terms of risk preferences. This research project thus aims to first develop a theoretical model on the role of wage requests. Second, we will empirically evaluate the role of a wage request by assembling data from job ads and by existing data on actual individual wage negotiations from Jusek. This part will contribute to the understanding of wage differentials in general, and to observed wage differentials by gender in particular. Our final method is to analyze wage requests and risk preferences by conducting a wagebargaining experiment for a real job.

Last updated on 2017-29-03 at 17:13