The present study is a theoretical and empirical investigation into the aggregate wage dynamics of Swedish manufacturing. It contains three essential results:
- a rigorous search theoretical model of the wage behaviour of firms is presented and adapted for application to aggregate data
- the implications of the model are confirmed by Swedish data for manufacturing industry and a stable wage drift equation is demonstrated to have existed since the mid-sixties
- the model is consistent with the findings of earlier postwar empirical research on wage drift in Sweden and provides them with a more satisfactory theoretical interpretation.
