On involuntary unemployment: notes on efficiency-wage competition
AbstractThis paper introduces a model of efficiency-wage competition along the lines put forward by Hahn (1987). Specifically, I analyse a two-firm economy in which employers screen their workforce by means of increasing wage offers competing one another for high-quality employees. The main results are the following. First, using a specification of effort such that the problem of firms is concave, optimal wage offers are strategic complements. Second, a symmetric Nash equilibrium can be locally stable under the assumption that firms adjust their wage offers in the direction of increasing profits by conjecturing that any wage offer above (below) equilibrium will lead competitors to underbid (overbid) such an offer. Finally, the exploration of possible labour market equilibria reveals that effort is counter-cyclical.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 38140.
Date of creation: 2012
Date of revision:
Efficiency-Wages; Wage Competition; Nash Equilibria; Effort;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-23 (All new papers)
- NEP-CTA-2012-04-23 (Contract Theory & Applications)
- NEP-HRM-2012-04-23 (Human Capital & Human Resource Management)
- NEP-LAB-2012-04-23 (Labour Economics)
- NEP-MAC-2012-04-23 (Macroeconomics)
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