Labour and the ‘law of one price’: regional wage convergence of farm workers in Sweden, 1757–1980

Research output: Contribution to journalArticle

Abstract

Economic theory predicts that differences in wages for workers with similar skills will decline as labour mobility increase. This prediction is reminiscent of the ‘law of one price’, the notion that markets, if unfettered, eliminates price differentials of similar commodities across space. But can we really apply the economic logic of the commodity market to the labour market, governed as it is by institutions and politics as well as market forces? In this paper, we have examined the spread in farm workers’ wages across Swedish counties in 1757–1980. Besides nominal wages, the paper also offers cost of living indices by county. The paper enquires into sigma convergence and beta convergence. Long-run convergence, by both measures, was massive; the coefficient of variation, for instance, declined from about 28 per cent in the mid-eighteenth century to 4 per cent in 1980. Most of the compression, though, occurred in brief episodes rather than continuously. Markets, through labour mobility and trade, and institutions, through collective actions and labour laws, took turns in pushing towards regional convergence. The ‘law of one price’, we conclude, was not singlehandedly responsible for the elimination of regional wage differentials.

Details

Authors
Organisations
External organisations
  • University of Gothenburg
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economic History

Keywords

  • Law of one price, regional wage convergence, farm workers, labour market institutions, Sweden
Original languageEnglish
Pages (from-to)41-62
JournalScandinavian Economic History Review
Volume69
Issue number1
Early online date2020 Mar 25
Publication statusPublished - 2021
Publication categoryResearch
Peer-reviewedYes