AbstractActual wages typically exceed collectively set standard wages. Standard wages are, therefore, not binding, yet they seem to influence actual wages strongly. An explanation for this phenomenon is offered along the lines of the Fair Wage/Effort Hypothesis proposed by G. Akerlof and J. Yellen (1990). It is argued that it is precisely when collectively set wages are relatively unimportant for perceptions of fairness at the firm level, that large wage mark-ups emerge. The general point seems to be that the results of economic modeling may react very sensitively to the customary suppression of "non-economic" factors.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 3165.
Date of creation: 1992
Date of revision:
Publication status: Published in Journal of Institutional and Theoretical Economics 3 148(1992): pp. 437-451
Wage setting; fair wage; collective bargaining; efficiency wage; wage drift;
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