| Summary: | The purpose of this thesis is to look into the relationship between relative wage and labor shortage in the Swedish labor market. This relationship is expected to be positive since wage increases are often used as a mechanism to counter shortages. To look into this relationship the seemingly unrelated regression model (SUR), as well as the random effects model are introduced. The results indicate that there exists a positive relationship between relative wage and shortage for occupations with higher degree of shortage and a negative relationship for occupations with no or low degree of shortage. From the results, the evidence suggests that relative wage is a good mechanism for countering shortages, but not a sufficient one.
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