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Efficiency Wages and Equilibrium Wages

Author

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  • Black, Dan A
  • Garen, John E

Abstract

The authors present a labor-market model that allows as special cases a market paying equilibrium wages, one paying disequilibrium efficiency wages, and a market combining the two. Their analysis indicates that industrial wage differentials are not necessarily evidence of efficiency wages. Such differentials may be explained by differences across industries in labor performance standards or in the accuracy with which worker effort can be measured. The authors do find, however, that the relationship between wages and dismissals can be used to distinguish a market paying equilibrium wages from one paying efficiency wages. Copyright 1991 by Oxford University Press.

Suggested Citation

  • Black, Dan A & Garen, John E, 1991. "Efficiency Wages and Equilibrium Wages," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 525-540, July.
    • Handle: RePEc:oup:ecinqu:v:29:y:1991:i:3:p:525-40
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    Cited by:

    1. Strobl, Eric & Walsh, Frank, 2007. "Estimating the shirking model with variable effort," Labour Economics, Elsevier, vol. 14(3), pages 623-637, June.
    2. Ignacio Falgueras‐Sorauren, 2010. "New Lights On The Robbinsian Theory Of Work Supply," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(4), pages 375-403, September.
    3. Lang, Oliver, 1993. "Lohnprämien und Leistungsbereitschaft: Ein latentes Strukturmodell zur empirischen Überprüfung der Shirking-Hypothese," ZEW Discussion Papers 93-17, ZEW - Leibniz Centre for European Economic Research.
    4. Johann Jaekel, 2012. "Work Effort, Firm Closure and Signaling through Excess Capacity Investment," SCEPA working paper series. 2012-7, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    5. Thomas Groll & Christopher J. Ellis, 2017. "Repeated Lobbying By Commercial Lobbyists And Special Interests," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1868-1897, October.
    6. Pablo González, 2002. "Profit Sharing Reconsidered: Efficiency Wages and Renegotiation Costs," Documentos de Trabajo 151, Centro de Economía Aplicada, Universidad de Chile.

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