Our analysis suggests that income equality in the Nordics is primarily driven by a significant compression of hourly wages, reducing the returns to labor market skills and education. This appears to be achieved through a wage bargaining system characterized by strong coordination both within and across industries. This finding contrasts with other commonly cited explanations for Nordic income equality, such as redistribution through the tax-transfer system, public spending on goods that complement employment, and public policies aimed at equalizing skills and human capital distribution.

That is from a new NBER working paper by Magne Mogstad, Kjell G. Salvanes, and Gaute Torsvik.

Keep reading this article on Marginal Revolution.

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