A Dynamic Efficiency-Wage Model with Continuous Effort and Externalities
AbstractThis paper provides a general equilibrium efficiency-wage model in which employment evolves according to the rules of the Shapiro-Stiglitz?s (1984) shirking model. The proposed framework allows us to endogenise in a continuous manner the effort decision undertaken by the individual worker and it may resolve the indeterminacy arising from a model with exogenous (and constant) effort. Moreover, by exploiting an externality argument, we allow the model to capture different local dynamic patterns in which are found convergent fluctuations and persistent cycles. Finally, we show that in our framework unemployment may actually act as a worker discipline device, i.e., equilibria with higher (lower) unemployment rates are also characterised by higher (lower) effort levels.
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.
Bibliographic InfoArticle provided by Economic Issues in its journal Economic Issues.
Volume (Year): 13 (2008)
Issue (Month): 2 (September)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Timothy J. Kehoe & David K. Levine & Paul Romer, 1992. "On Characterizing Equilibria of Models with Externalities and Taxes as Solutions to Optimization Problems," Levine's Working Paper Archive 124, David K. Levine.
- Faria, Joao Ricardo, 2000. "Supervision and effort in an intertemporal efficiency wage model: the role of the Solow condition," Economics Letters, Elsevier, vol. 67(1), pages 93-98, April.
- Nakajima, Tomoyuki, 2006.
"Unemployment and indeterminacy,"
Journal of Economic Theory,
Elsevier, vol. 126(1), pages 314-327, January.
- Christophre Georges, 2002. "An Efficiency Wage Model With Persistent Cycles," Economics Bulletin, AccessEcon, vol. 5(3), pages 1-6.
- Alexopoulos, Michelle, 2004. "Unemployment and the business cycle," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 277-298, March.
- Georges, Christophre, 1995. "Adjustment costs and indeterminacy in perfect foresight models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 39-50.
- repec:ebl:ecbull:v:5:y:2002:i:3:p:1-6 is not listed on IDEAS
- Guerrazzi, Marco, 2011.
"The animal spirits hypothesis and the Benhabib-Farmer condition for indeterminacy,"
30673, University Library of Munich, Germany.
- Guerrazzi, Marco, 2012. "The animal spirits hypothesis and the Benhabib–Farmer condition for indeterminacy," Economic Modelling, Elsevier, vol. 29(4), pages 1489-1497.
- Guerrazzi, Marco, 2012. "On involuntary unemployment: notes on efficiency-wage competition," MPRA Paper 38140, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dan Wheatley).
If references are entirely missing, you can add them using this form.