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Efficiency-wage Hypothesis and the Operational Production Pattern

Author

Listed:
  • Brian W. Bresnahan
  • Nadeem Naqvi
  • Carolin Schürg

Abstract

An economy’s production set is the collection of all net output vectors that the economy is capable of producing with a given technology and fixed quantities of primary factors of production. The boundary of this set is called the production possibility frontier or PPF. We show that, if the efficiency-wage hypothesis holds, a country’s PPF, though conceptually valid, is an operationally irrelevant concept, because the economy never operates on the PPF, which is a view that ought to be appreciated in light of persistent unemployment in the new structure of economies of the post-21st-Centurycrisis world.

Suggested Citation

  • Brian W. Bresnahan & Nadeem Naqvi & Carolin Schürg, 2012. "Efficiency-wage Hypothesis and the Operational Production Pattern," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 2(3), pages 244-244.
    • Handle: RePEc:ers:ijfirm:v:2:y:2012:i:3:p:244
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    References listed on IDEAS

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