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An efficiency wage approach to reconciling the wage curve and the Phillips curve

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  • Campbell III, Carl M.

Abstract

This study develops an efficiency wage model that generates a wage curve at the regional level and a Phillips curve at the national level, under the assumption that workers' efficiency depends on both regional and aggregate labor market conditions. An equation relating wages to unemployment and lagged wages is derived from the profit-maximizing behavior of firms, and it is demonstrated that the coefficient on lagged wages is less than 1 with regional data but equals 1 with aggregate data. In addition, there is an equilibrium relationship between unemployment and wages at the regional level, but not at the aggregate level.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 15 (2008)
Issue (Month): 6 (December)
Pages: 1388-1415

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Handle: RePEc:eee:labeco:v:15:y:2008:i:6:p:1388-1415

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Keywords: J41 Efficiency wages Phillips curve wage curve;

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References

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Cited by:
  1. Campbell, Carl, 2011. "Efficiency wage setting, labor demand, and Phillips curve microfoundations," MPRA Paper 34121, University Library of Munich, Germany.
  2. Campbell III, Carl M., 2010. "Deriving the wage-wage and price-price Phillips curves from a model with efficiency wages and imperfect information," Economics Letters, Elsevier, vol. 107(2), pages 242-245, May.
  3. García-Mainar , Inmaculada & Montuenga-Gómez , Víctor M., 2012. "Wage dynamics in Spain: evidence from individual data (1994-2001)," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 24, pages 41-58.

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