The solidaristic wage policy in Sweden, negotiated by peak organizations on the labor market between 1956 and 1983, has been associated with a decrease in wage differences across regions, leading to the interregional migration flows that culminated during the 1960s. While the effects of the solidaristic wage policy have been widely discussed, there is little evidence on the actual evolution of regional wages and its effect on economic restructuring, especially before the 1970s. Using new regional wage data, I examine the evolution of wage dispersion and analyze the changes using a regression-decomposition framework. The results show that wage inequality was stable before 1968, then it rapidly declined. According to the decomposition, this decline was also likely the result of deliberate union policy. However, the wage policy cannot explain the height of regional restructuring in the 1960s since it is unlikely to have affected the wage structure at the time.

It has been suggested that Swedish policy during the early postwar period was strongly directed towards mobility increasing expenditures, most notably relocation allowances, aimed at moving labor from north to south. While this view has dominated the academic discussion on labor market policy there is little direct evidence. We make three claims. First, the relocation allowances have to be evaluated against the regional policy. Second, by doing so we show that the mobility oriented policy was predominant only for a short period of time. In the early 1970s, there was a decisive shift towards a policy directed at stimulating employment in the north. Third, drawing on this, we reevaluate the previous view on policy making in Sweden. Our analysis suggests that the Social Democratic government acted in a voter maximizing way. The relocation allowances were introduced at the behest of the Trade Union Confederation (LO). The regional subsidies were expanded when voter sentiment turned against the perceived depletion of rural regions. However, this strategy interacted with the political and institutional environment. The new election law in 1970 and political competition from the Center Party pushed the Social Democrats to shift their policies on regional subsidies.

The Swedish model was built on the notion that mobility from high- to low-unemployment areas could be achieved without large wage differentials if active labor market policy was used to aid in the movements across places. While Sweden pioneered the use of relocation allowances on a large scale in the late 1950s, very little is known about the actual implementation of this program. Its role during the large out-migrations from northern Sweden during the 1960s is especially underresearched. In this essay, I study the usage of the program through a case study of  Västernorrland county from 1965 to 1975. The analysis shows that in the 1960s there was a strong selection into the program by younger persons, newly examined students and from certain sectors. After 1970, there was a shift in government policy with the aim of reducing the outflow of migrants from the northern counties and to keep allowance migration within counties. Between 1970 and 1975 there was also a drop in both regular and allowance out-migration by 20 %. Within the group of allowance migrants, however, there was no change in the likelihood of staying within Västernorrland after controlling for age, sex and occupation. The share of out-migrations that took place with support from the program also remained constant at 20 %. This suggests that the decline in out-migration was probably not caused by lower mobility but was rather more likely the consequence of structural change and alterations to public policy after 1970, which improved the labor market situation in the northern counties.