Can Wage Increases Pay for Themselves? Tests with a Production Function
AbstractEfficiency wage theories predict that companies that pay high wages will have higher productivity from high work effort, low turnover, and other efficiency-enhancing effects. This paper uses the PIMS line-of-business data set to test whether high wage businesses are more productive. Relative wages were measured by managers' assessments of their relative compensation, holding worker quality constant. A positive relation was found between changes in relative wages and changes in total factor productivity. The elasticity of output with respect to wages was of the magnitude predicted by efficiency wage theories. Also consistent with efficiency wage theories, the relationship between changes in wages and changes in productivity was weaker at businesses with high unionization. Results from two additional data sets imply that high wages are not merely measuring high human capital. Copyright 1992 by Royal Economic Society.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 102 (1992)
Issue (Month): 414 (September)
Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Web page: http://www.res.org.uk/
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.