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Relative Wages, Efficiency Wages, and Keynesian Unemployment

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  • Lawrence H. Summers

Abstract

While modern economic theorists have produced a variety of explanations for the failure of wages to fall in the face of unemployment, Keynes emphasis on relative wages has not been reflected in most contemporary discussions. This short paper suggests that relative wage theories in which workers' productivity depends primarily on their relative wage provide the best available apparatus for understanding actual unemployment and its fluctuations. Such theories are very closely related to the efficiency wage theories that have received widespread attention in recent years.

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File URL: http://www.nber.org/papers/w2590.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2590.

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Date of creation: May 1988
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Publication status: published as The American Economic Review, Vol. 78, No. 2, pp. 383-388, (May 1988).
Handle: RePEc:nbr:nberwo:2590

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  1. Joseph E. Stiglitz, 1984. "Theories of Wage Rigidity," NBER Working Papers 1442, National Bureau of Economic Research, Inc.
  2. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
  3. Lindbeck, Assar & Snower, Dennis J., 1986. "Efficiency Wages Versus Insiders and Outsiders," CEPR Discussion Papers 133, C.E.P.R. Discussion Papers.
  4. Johnson, G.E. & Layard, P.R.G., 1987. "The natural rate of unemployment: Explanation and policy," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 16, pages 921-999 Elsevier.
  5. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
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