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What determines workers’ preferences for efficiency over equity wages?

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Author Info
Prosper F. Bangwayo-Skeete () (Portfolio of Finance and Economics, Government of Cayman Islands)
Afaf H. Rahim () (Center for Near and Middle Eastern Studies, Philipps- Universität Marburg, Germany)
Precious Zikhali () (Centre for World Food Studies, VU University Amsterdam, The Netherlands)
Abstract

What makes workers consider it fair for wages to be indexed on job performance or efficiency? In this paper we attempt to answer this question using the 2005 wave of the World Values Survey data for 43 countries to investigate what socio-economic characteristics condition employees’ preference for efficiency over equity wages. Our results suggest that employees’ preference for efficiency wages increases with education and globalization while it decreases with unemployment, income inequality and income tax rates. Given that conventional economic theory demonstrates the importance of labour efficiency, which improves when workers are remunerated according to their efficiency, for economic growth; our results suggest that institutions and specifically public policies that promote education, and globalization, along with policies that reduce unemployment, income inequality and income tax rates could be used to promote efficiency-based wages.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/33-2009_bangwayo.pdf
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200933.

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Length: 15 pages
Date of creation: 2009
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Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200933

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Find related papers by JEL classification:
D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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  1. Gottfries, Nils & Westermark, Andreas, 1998. "Nominal wage contracts and the persistent effects of monetary policy," European Economic Review, Elsevier, vol. 42(2), pages 207-223, February. [Downloadable!] (restricted)
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  2. Carter, Thomas J., 2005. "Money and efficiency wages: the neglected effect of employment on efficiency," The Journal of Socio-Economics, Elsevier, vol. 34(2), pages 199-209, March. [Downloadable!] (restricted)
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