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The paper presents empirical evidence on wage formation in Norway using annual time series data for manufacturing industry. First, we show that long-run effects of consumer prices and taxes depend strongly on the exact definition of the empirical variables. Using the implicit factor income deflator, the wedge between consumer's and producer's real wages is insignificant. Second, our results indicate that there is a long-run tradeoff between the wage level and the unemployment ratio and the Phillips curve specification is firmly rejected. Third, the paper presents empirical evidence in favor of a strongly nonlinear wage curve. Fourth, our results support the long-term unemployment hypothesis, as increased proportion of long-term unemployment shifts the wage curve outwards and to the right. Copyright 1995 by Blackwell Publishing Ltd