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Labor Turnover and the Natural Rate of Unemployment: Efficiency Wage versus Frictional Unemployment

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  • MacLeod, W Bentley
  • Malcomson, James M
  • Gomme, Paul

Abstract

Wage and unemployment responses to changes in economic environment are compared for efficiency wage and frictional models. Changes in aggregate demand, persistence of job-specific shocks, cost of living, and unemployment benefits are considered. Wages and unemployment move in the same direction in the two models, except that an upward shift in aggregate labor demand can reduce the real wage in the efficiency wage, but not the frictional, model. In a numerical simulation calibrated to U.S. data, real productivity shocks in the efficiency wage model yield a ratio of unemployment to wage variability close to that of the United States. Copyright 1994 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 12 (1994)
Issue (Month): 2 (April)
Pages: 276-315

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Handle: RePEc:ucp:jlabec:v:12:y:1994:i:2:p:276-315

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Cited by:
  1. Vindigni, Andrea, 2008. "Uncertainty and the politics of employment protection," POLIS Working Papers 106, Institute of Public Policy and Public Choice - POLIS.
  2. Patrick Francois & Joanne Roberts, 2003. "Contracting Productivity Growth," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 59-85.
  3. Cahill, Miles B., 2000. "Exploring the interaction between efficiency wages and labor market frictions," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(1), pages 121-137.
  4. Wouter J. den Haan & Garey Ramey & Joel Watson, 1999. "Contract-Theoretic Approaches to Wages and Displacement," Cowles Foundation Discussion Papers 1216, Cowles Foundation for Research in Economics, Yale University.
  5. Patrick Francois & Huw Lloyd-Ellis, 2005. "Schumpeterian Restructuring," Working Papers 1039, Queen's University, Department of Economics.
  6. Vindigni, Andrea, 2008. "Uncertainty and the Politics of Employment Protection," IZA Discussion Papers 3509, Institute for the Study of Labor (IZA).
  7. Moen, Espen R & Rosen, Asa, 2006. "Incentives in Competitive Search Equilibrium and Wage Rigidity," CEPR Discussion Papers 5554, C.E.P.R. Discussion Papers.
  8. Vindigni, Andrea, 2008. "Uncertainty and the Politics of Employment Protection," Papers 05-27-2008, Princeton University, Research Program in Political Economy.
  9. Andrea Vindigni, 2008. "Uncertainty and the Politics of Employment Protection," LABORatorio R. Revelli Working Papers Series 77, LABORatorio R. Revelli, Centre for Employment Studies.

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