Modelling Wages in the Small Open Economy: An Error-Correction Model of Norwegian Manufacturing Wages.

This paper develops a dynamic model of Norwegian manufacturing wages which is consistent with the temporal properties of the data. The stability of the equation is tested by recursive methods. In a hypothetical steady-state, the wage-share is conditional on unemployment and a wedge term. Hence, the model is a generalization of Aukrust's main course theory of inflation in small, open economies and is consistent with the broad implications of bargaining theories. The proposed model encompasses an earlier study of the open-economy, Phillips-curve type. Copyright 1989 by Blackwell Publishing Ltd