Motivation and Markets
AbstractMany workers receive pay based on subjectively assessed performance, yet the shirking model of efficiency wages excludes it. This paper incorporates such pay, with the following results. Performance pay is more efficient than efficiency wages when the costs of having a job vacant are low and qualified workers in short supply. More capital-intensive industries pay more than less capital-intensive industries, as observed in studies of interindustry wages differentials. Sustaining an efficient outcome requires a social convention similar to the notion of a fair wage. The model also makes predictions about the relationship between turnover, wages, growth, and unemployment. Copyright 1998 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 88 (1998)
Issue (Month): 3 (June)
Other versions of this item:
- MacLeod, W.B. & Malcomson, J.M., 1997. "Motivation and markets," Discussion Paper Series In Economics And Econometrics 9720, Economics Division, School of Social Sciences, University of Southampton.
- W. Bentley MacLeod & James Malcomson, 1997. "Motivation and Markets," Boston College Working Papers in Economics 339., Boston College Department of Economics.
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