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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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 - - 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
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan Blinder, 2010. "Teaching Macro Principles after the Financial Crisis," The Journal of Economic Education, Taylor & Francis Journals, vol. 41(4), pages 385-390, September.
- Lawrence H. Summers, 1988.
"Relative Wages, Efficiency Wages, and Keynesian Unemployment,"
NBER Working Papers
2590, National Bureau of Economic Research, Inc.
- Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-88, May.
- Neary, J Peter, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 551-70, August.
- Henrik Egbert & Nadeem Naqvi, 2011.
"Market-dependent Production Set,"
MAGKS Papers on Economics
201145, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Batra, Raveendra N. & Naqvi, Nadeem, 1989. "Non-traded and intermediate goods and the theory of protection," European Economic Review, Elsevier, vol. 33(4), pages 721-735, April.
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernd Hayo).
If references are entirely missing, you can add them using this form.