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- Title
EFFICIENCY WAGE MODELS OF UNEMPLOYMENT: A SECOND VIEW.
- Abstract
Efficiency wage models, in which firms find it profitable to pay wages above workers' reservation wages, provide a promising explanation for unemployment and interindustry wage differential. One criticism of such models is they imply firms should sell jobs by requiring up-front bonds from new workers. However, only some efficiency wage models imply this. Moreover, firms might not require bonds for many reasons. We show that moral hazard and adverse selection models together explain many labor market phenomena. The efficiency wage models conforms well to empirical finding, but certain anomalies suggest the need to consider rent-sharing models.
- Subjects
WAGES; UNEMPLOYMENT; WAGE differentials; WAGE payment systems
- Publication
Economic Inquiry, 1990, Vol 28, Issue 2, p296
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/j.1465-7295.1990.tb00817.x