Efficiency-wage Hypothesis and the Operational Production Pattern
AbstractAn economy’s production set is the collection of all net output vectors that the economy is capable of producing with a given technology and fixed quantities of primary factors of production. The boundary of this set is called the production possibility frontier or PPF. We show that, if the efficiency-wage hypothesis holds, a country’s PPF, though conceptually valid, is an operationally irrelevant concept, because the economy never operates on the PPF, which is a view that ought to be appreciated in light of persistent unemployment in the new structure of economies of the post-21st-Century-crisis world.
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Bibliographic InfoPaper 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 201146.
Length: 14 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
general equilibrium; production set; production possibility frontier; efficiency wage; economic policy; labor market;
Find related papers by JEL classification:
- A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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33829, University Library of Munich, Germany.
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