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The Macroeconomic Consequences of Reciprocity in Labor Relations

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  • Jean-Pierre Danthine
  • André Kurmann

Abstract

We develop and analyze a structural model of effciency wages founded on reciprocity. Workers are assumed to face an explicit trade-off between the disutility of providing effort and the psychological benefit of reciprocating the gift of a wage offer above some reference level. The model provides a rationale for rent sharing - a feature that is very much present in the data but absent from previous formulations of the effciency wage hypothesis. This firm-internal perspective on effciency wages has important macroeconomic consequences: rent-sharing considerations promote wage rigidity, internal amplification and asymmetric responses to technology and demand shocks.

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Bibliographic Info

Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 05.08.

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Length: 34 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:lau:crdeep:05.08

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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
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Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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Keywords: reciprocity; rent-sharing; effciency wages; wage rigidity;

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Citations

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Cited by:
  1. Hartmut Egger & Peter Egger & Udo Kreickemeier, 2012. "Trade, Wages, and Profits," CESifo Working Paper Series 3911, CESifo Group Munich.
  2. Hartmut Egger & Udo Kreickemeier, 2010. "Worker-specific Effects of Globalisation," The World Economy, Wiley Blackwell, vol. 33(8), pages 987-1005, 08.
  3. Danthine, Jean-Pierre & Kurmann, Andre, 2007. "The Business Cycle Implications of Reciprocity in Labour Relations," CEPR Discussion Papers 6587, C.E.P.R. Discussion Papers.
  4. Ansgar Rannenberg, 2009. "Shocks, Monetary Policy and Institutions: Explaining Unemployment Persistence in "Europe" and the United States," CDMA Working Paper Series 200903, Centre for Dynamic Macroeconomic Analysis.
  5. Monica Correa-Lopez & George Choullarakis, 2012. "A Fair Wage Model of Unemployment with Inertia in Fairness Perceptions," Working Papers 1203, BBVA Bank, Economic Research Department.
  6. Strifler, Matthias & Beissinger, Thomas, 2012. "Fairness Considerations in Labor Union Wage Setting: A Theoretical Analysis," IZA Discussion Papers 6799, Institute for the Study of Labor (IZA).
  7. Francesco Busato & William Addessi, 2007. "Labor Unions and Asset Prices," Economics Working Papers 2007-05, School of Economics and Management, University of Aarhus.
  8. Andrea Vaona, 2013. "Inflation gifts and endogenous growth through learning-by-doing," Working Papers 09/2013, University of Verona, Department of Economics.
  9. Ansgar, Rannenberg, 2009. "Disinflation and the NAIRU in a New-Keynesian New-Growth Model (Extended Version)," MPRA Paper 13610, University Library of Munich, Germany.
  10. Addessi, William & Busato, Francesco, 2009. "Fair wages, labor relations and asset returns," Journal of Financial Stability, Elsevier, vol. 5(4), pages 410-430, December.
  11. Erkki Koskela & Ronnie Schöb, 2009. "A note on internal and external reference in efficiency wage models," Journal of Economics, Springer, vol. 96(1), pages 79-86, January.
  12. Matthieu Chemin & Joost DeLaat & André Kurmann, 2011. "Reciprocity in Labor Relations: Evidence from a Field Experiment with Long-Term Relationships," Cahiers de recherche 1127, CIRPEE.

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