Gift exchange and the business cycle: the fair wage strikes back
AbstractWe extend the benchmark RBC model amending the technology for efficiency wage considerations. The disutility of effort depends on current, alternative and past wages. Past wages are treated as the worker's past wages (personal norm case) or as the past wages of the society (social norm case). This last model reproduces the high variability of employment, the low variability of wages and the low wage-employment correlation without requiring a second source of impulsions. Moreover the dynamics of wages and employment is adequately captured when norms adjust slowly to the environment. Efficiency wages are thus useful to solve the business cycle puzzle when we allow for inter-temporal wage comparisons.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1997008.
Date of creation: 01 Dec 1996
Date of revision: 00 Apr 1997
efficiency wage; effort; time-non-separability; RBC; wage sluggishness; business cycle puzzle;
Other versions of this item:
- Fabrice Collard & David de la Croix, 2000. "Gift Exchange and the Business Cycle: The Fair Wage Strikes Back," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 166-193, January.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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