Efficiency Wage Theories: A Partial Evaluation / Lawrence F. Katz.

Format:

Book

Author/Creator:

Katz, Lawrence F.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1906.

NBER working paper series no. w1906

Language:

English

Subjects (All):

Wages--Mathematical models.

Wages.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Efficiency Wage Theories

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Cambridge, Massachusetts : National Bureau of Economic Research, 1986.

Summary:

This paper surveys recent developments in the literature on efficiency wage theories of unemployment. Efficiency wage models have in common the property that in equilibrium firms may find it profitable to pay wages in excess of market clearing. High wages can help reduce turnover, elicit worker effort, prevent worker collective action, and attract higher quality employees. Simple versions of efficiency wage models can explain normal involuntary unemployment,segmented labor markets, and wage differentials across firms and industries for workers with similar productive characteristics. Deferred payment schemes andother labor market bonding mechanisms appear to be able to solve some efficiency wage problems without resultant job rationing and involuntary unemployment. A wide variety of evidence on inter-industry wage differences is analyzed. Efficiency wage models appear useful in explaining the observed pattern of wage differentials.The models also provide several potential mechanisms for cyclical fluctuations in response to aggregate demand shocks.

Notes:

Print version record

April 1986.