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Dynamic of Employment and Wages Incentives

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  • Faria, Joao
  • Jellal, Mohamed

Abstract

This paper studies a dynamic model with efficiency wages and adjustment costs associated with hiring and firing decisions. With linear adjustment costs, the optimal efficiency wage and employment are affected by the real interest rate and adjustment costs. When lumpy costs or convex adjustment costs (symmetric or asymmetric) are taken into account, the interest rate and the adjustment costs do not play any role in determining the equilibrium efficiency wage and level of employment.

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File URL: http://mpra.ub.uni-muenchen.de/17183/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17183.

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Date of creation: 08 Sep 2009
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Handle: RePEc:pra:mprapa:17183

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Keywords: Wage determination; Jobs creation;

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  1. Ray C. Fair, 1984. "Excess Labor and the Business Cycle," NBER Working Papers 1292, National Bureau of Economic Research, Inc.
  2. Faria, Joao Ricardo, 2000. "Supervision and effort in an intertemporal efficiency wage model: the role of the Solow condition," Economics Letters, Elsevier, vol. 67(1), pages 93-98, April.
  3. Daniel S. Hamermesh, 1988. "Labor Demand and the Structure of Adjustment Costs," NBER Working Papers 2572, National Bureau of Economic Research, Inc.
  4. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
  5. Nickell, Stephen, 1984. "An Investigation of the Determinants of Manufacturing Employment in the United Kingdom," Review of Economic Studies, Wiley Blackwell, vol. 51(4), pages 529-57, October.
  6. Shapiro, Matthew D, 1986. "The Dynamic Demand for Capital and Labor," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 513-42, August.
  7. Aizcorbe, Ana M, 1992. "Procyclical Labour Productivity, Increasing Returns to Labour and Labour Hoarding in Car Assembly Plant Employment," Economic Journal, Royal Economic Society, vol. 102(413), pages 860-73, July.
  8. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321.
  9. Fay, Jon A & Medoff, James L, 1985. "Labor and Output over the Business Cycle: Some Direct Evidence," American Economic Review, American Economic Association, vol. 75(4), pages 638-55, September.
  10. Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March.
  11. Jellal, Mohamed & Zenou, Yves, 2000. "A dynamic efficiency wage model with learning by doing," MPRA Paper 38513, University Library of Munich, Germany.
  12. Hamermesh, Daniel S & Pfann, Gerard A, 1996. "Turnover and the Dynamics of Labour Demand," Economica, London School of Economics and Political Science, vol. 63(251), pages 359-67, August.
  13. Ramaswamy, Ramana & Rowthorn, Robert E, 1991. "Efficiency Wages and Wage Dispersion," Economica, London School of Economics and Political Science, vol. 58(232), pages 501-14, November.
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