Cointegration in the Norwegian Model for Wage Formation. Against the Backdrop of the 2004 EU Expansion and the 2001 Change to Inflation Targeting, Have Wage Levels in the Construction and Wholesale Undersectors Continued to Exhibit a Long-Run Relationship with Wage Levels in the Industry, Public and Private Sectors?

Abstract

In this thesis, hourly wage rate data spanning 1978-2018 has been collected to investigate if the wage levels in the construction and wholesale sectors follow the wage levels in the industry, public, and private sectors. Against the backdrop of the EU expansion in 2004 and the 2001 implementation of inflation targeting monetary policy, there has been an interest in studying the stability of the dynamics of the Norwegian wage formation model. Anchored in data, the construction and wholesale undersectors have been selected to study the cointegrating dynamics of the Norwegian model. Testing for cointegration in the variables, the results show one cointegrating vector; implying the existence of a long-run equilibrium relationship between the wage variables. The results thus show that, despite the EU expansion and the introduction of inflation targeting monetary policy, the Norwegian model ensures that the sector-wise wage levels never stray too far away from each other.