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Comment by Nils Karlson – Nordic Economic Policy Review 2025: Wage formation and the Nordic model

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Abstract

Nils Karlson critiques Ejrnæs and Rasmussen’s analysis of public-sector wage formation, arguing that the authors underestimate the structural challenges caused by highly centralised wage-setting in the Nordic model. He highlights three major issues: strict public budget constraints, Baumol’s cost disease, and the distinct dynamics of labour conflicts in the public sector. These factors limit wage flexibility, hinder incentives and recruitment, and contribute to persistent skill shortages. Karlson concludes that the problems are broader and deeper than suggested and likely require more far-reaching reforms than the authors propose.

Karlson, N. (2025). Comment by Nils Karlsson – Nordic Economic Policy Review 2025: Wage formation and the Nordic model [Comment on “Public sector wages” by M. Ejrnæs & A. Würtz Rasmussen]. Norden.org.

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Author
Nils Karlson
Publication year
2025
Published in

Nordic Economic Policy Review.

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  • Professor, Founder and former CEO

    Nils Karlson

    +46708670351nils.karlson@ratio.se

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We study the effects of principal instructional leadership on pupil educational achievement using longitudinal data of 120,394 teacher responses across 1919 schools in Sweden over 9 years. Through multilevel structural equation modelling, we test how teacher ratings of principal leadership influence indicators of educational achievement and the extent to which this effect is channelled through a collaborative teacher culture in schools. Findings suggest that teacher collaboration partly mediates the relationship between principal instructional leadership and pupil educational achievement in terms of final year grade point average. However, concerning final year standardised test scores, principal instructional leadership alone has a stronger relationship to school performance than teacher collaboration. The longitudinal analysis suggests these patterns are driven by relatively stable differences between schools rather than dynamic changes in schools over time, indicating that variation in school contexts such as culture, organisational structure, and leadership practices persist over time. We discuss implications for research, practice, and policy on school leadership and teacher collaboration.

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