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Labor market dynamics when effort depends on wage growth comparisons

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Author Info

  • Jean-Pierre Urbain

    ()
    (University of Maastricht, Department of Quantitative Economics, P.O. Box 616, 6200 MD Maastricht, The Netherlands)

  • Franz Palm

    ()
    (University of Maastricht, Department of Quantitative Economics, P.O. Box 616, 6200 MD Maastricht, The Netherlands)

  • David de la Croix

    ()
    (National Fund for Scientific Research and University of Louvain, Department of Economics, Place Montesquieu 3, B-1348 Louvain-la-Neuve)

Abstract

We present an efficiency wage model in which workers' disutility of effort depends on the level and on the growth rate of their wage relative to an alternative wage. Using data for four countries (US, UK, FR, GY), the implications of the model are examined and are found to be in accordance with the information in the non-stationary data. The restrictions implied by the model dynamics are not rejected by the data and the structural parameters are found to be constant through time. One interesting result is that the workers' disutility of effort depends less on relative wages growth and more on relative wage levels in the US than in the three European countries analyzed.

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 25 (2000)
Issue (Month): 3 ()
Pages: 393-419

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Handle: RePEc:spr:empeco:v:25:y:2000:i:3:p:393-419

Note: received: September 1998 / Final version accepted: November 1999
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Related research

Keywords: Efficiency wages · partial gift exchange · effort function · cointegration · GMM.;

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References

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Citations

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Cited by:
  1. Drakopoulos, Stavros A., 2007. "Comparison Wage in Trade Union Decision Making," MPRA Paper 46287, University Library of Munich, Germany.
  2. Fabien Tripier, 2005. "Sticky prices, fair wages, and the co-movements of unemployment and labor productivity growth," Macroeconomics 0510015, EconWPA.
  3. Xavier Raurich & Valeri Sorolla, . "Unemployment and Wage Formation in a Growth Model with Public Capital," UFAE and IAE Working Papers 508.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  4. Xavier Raurich & Valeri Sorolla, 2008. "A General Framework for Growth Models with Non-Competitive Labor and Product Markets and Disequilibrium Unemployment," Working Papers 369, Barcelona Graduate School of Economics.

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