THEORIES OF PAY AND UNEMPLOYMENT - SURVEY EVIDENCE FROM SWEDISH MANUFACTURING FIRMS

An interview survey was designed to explore how personnel managers and senior wage negotiators respond to popular models of the labor market . As in Blinder and Choi (1990), our results indicate that relative wa ges and notions of fairness are important, and that this may explain n ominal wage rigidity. We find much evidence of efficiency wage mechani sms. The reactions to some questions also paint to theories based on r ent-sharing. Moreover, while underbidding is not that uncommon, firms seem quite unwilling to hire underbidders. We also obtain indications of adverse selection problems.