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Efficiency Wages and Wage Dispersion

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  • Ramaswamy, Ramana
  • Rowthorn, Robert E
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    Abstract

    The efficiency wage hypothesis has normally been used to generate an equilibrium level of unemployment. The authors use it, instead, to generate an equilibrium wage distribution. This paper starts by generalizing the previous work of R. M. Solow in this area. They then use their results on effort-wage elasticities to derive a model of wage dispersion. The wage rate is shown to be an increasing function of the damage potential of workers; that is, workers with the highest damage potential receive the highest wage. The analysis of the equilibrium of the wage distribution provides interesting qualitative insights into the nature of actual wage differentials. Copyright 1991 by The London School of Economics and Political Science.

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    Bibliographic Info

    Article provided by London School of Economics and Political Science in its journal Economica.

    Volume (Year): 58 (1991)
    Issue (Month): 232 (November)
    Pages: 501-14

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    Handle: RePEc:bla:econom:v:58:y:1991:i:232:p:501-14

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    Cited by:
    1. Floro Ernesto Caroleo, 2004. "Fondamenti teorici della rigidità salariale nell'ambito dei non market clearing models," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2004(83).
    2. Mohamed Jellal & Francois-Charles Wolff, 2003. "Dual Labor Markets And Strategic Efficiency Wage," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 99-112.
    3. Craig A. Depken, II & Lisa E. Haglund, 2011. "Peer Effects in Team Sports: Empirical Evidence From NCAA Relay Teams," Journal of Sports Economics, , vol. 12(1), pages 3-19, February.
    4. Venkataraman Bhaskar & Ted To, 1999. "Oligopsony and the Distribution of Wages," CIRJE F-Series CIRJE-F-42, CIRJE, Faculty of Economics, University of Tokyo.
    5. repec:ebl:ecbull:v:10:y:2004:i:3:p:1-7 is not listed on IDEAS
    6. DepkenII, Craig A., 2000. "Wage disparity and team productivity: evidence from major league baseball," Economics Letters, Elsevier, vol. 67(1), pages 87-92, April.
    7. Faria, Joao & Jellal, Mohamed, 2009. "Dynamic of Employment and Wages Incentives," MPRA Paper 17183, University Library of Munich, Germany.
    8. Yamamura, Eiji, 2010. "Wage disparity and team performance in the process of industry development: Evidence from Japan’s professional football league," MPRA Paper 27363, University Library of Munich, Germany.
    9. Jellal, Mohamed & Zenou, Yves, 1999. "Efficiency wages and the quality of job matching," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 201-217, June.
    10. Jirjahn, Uwe & Kraft, Kornelius, 2008. "Teamwork and Intra-Firm Wage Dispersion among Blue-Collar Workers," IZA Discussion Papers 3291, Institute for the Study of Labor (IZA).
    11. Jellal, Mohamed & Zenou, Yves, 2000. "A dynamic efficiency wage model with learning by doing," Economics Letters, Elsevier, vol. 66(1), pages 99-105, January.
    12. Ewing, Bradley T., 1998. "Athletes and work," Economics Letters, Elsevier, vol. 59(1), pages 113-117, April.
    13. Egon Franck & Stephan Nüesch, 2007. "Wage Dispersion and Team Performance - An Empirical Panel Analysis," Working Papers 0073, University of Zurich, Institute for Strategy and Business Economics (ISU).
    14. Walsh, Frank, 2005. "Monetary shocks with variable effort," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 133-141, March.
    15. David Berri & R. Jewell, 2004. "Wage inequality and firm performance: Professional basketball's natural experiment," Atlantic Economic Journal, International Atlantic Economic Society, vol. 32(2), pages 130-139, June.
    16. W Brown & P Marginson & J Welsh, 2001. "The Management of Pay as the Influence of Collective Bargaining Diminishes," ESRC Centre for Business Research - Working Papers wp213, ESRC Centre for Business Research.

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