Wages ahead of demand
AbstractThis paper is an attempt to account for the empirical results of Krueger and Summers (1988) which suggest significant inter-industry wage differentials. We derive a dynamic efficiency wage model where firms use their wage policy to reduce turnover costs. Industry wages are shown to be a positive function of both the level of productivity and its expected rate of growth. We use estimated Solow residuals as measures of industry productivity growth and relate them to inter-industry wage differentials. A positive relationship is found at the one-digit level but not for two-digit manufacturing industries.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 53 (1996)
Issue (Month): 3 (December)
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Web page: http://www.elsevier.com/locate/ecolet
Other versions of this item:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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