The Relationship between Output and Unemployment with Efficiency Wages
AbstractWe construct a stylised model of the supply side with goods and labour market imperfections to show that an economy can rationally operate at an inefficient, or ‘low-effort’, state in which the relationship between output and unemployment is positive. We examine data from the G7 countries over 1960-2001 and find that only German data strongly favour a persistent negative relationship between the level of output and rate of unemployment. The consequence of this is that circumstances exist in which market imperfections could pose serious obstacles to the smooth working of expansionary and/or stabilization policies and a positive demand shock might have adverse effects on employment.
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 Centre for Dynamic Macroeconomic Analysis in its series CDMA Conference Paper Series with number 0607.
Date of creation: Sep 2006
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of St. Andrews, Fife KY16 9AL
Phone: 01334 462420
Fax: 01334 462444
Web page: http://www.st-andrews.ac.uk/cdma
More information through EDIRC
Efficiency wages; effort supply; Kalman filter; monopolistic competition; Okun’s law.;
Other versions of this item:
- Jim Malley & Hassan Molana, 2007. "The Relationship between Output and Unemployment with Efficiency Wages," German Economic Review, Verein für Socialpolitik, vol. 8, pages 561-577, November.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-14 (All new papers)
- NEP-LAB-2006-10-14 (Labour Economics)
- NEP-MAC-2006-10-14 (Macroeconomics)
- NEP-PBE-2006-10-14 (Public Economics)
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.:
- Carlin, Wendy & Soskice, David, 2005. "Macroeconomics: Imperfections, Institutions, and Policies," OUP Catalogue, Oxford University Press, number 9780198776222.
- Jim Malley & Thomas Moutos, .
"Capital Accumulation and Unemployment: A Tale of Two 'Continents',"
9820, Business School - Economics, University of Glasgow.
- Malley, Jim & Moutos, Thomas, 2001. " Capital Accumulation and Unemployment: A Tale of Two "Continents."," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 79-99, March.
- Jim Malley & Thomas Moutos, 2000. "Capital Accumulation and Unemployment: A Tale of Two "Continents"," CESifo Working Paper Series 236, CESifo Group Munich.
- Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000.
"Restructuring And Productivity Growth In UK Manufacturing,"
CEPR Discussion Papers
2463, C.E.P.R. Discussion Papers.
- Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, 07.
- Daron Acemoglu & Robert Shimer, 1999.
"Productivity Gains from Unemployment Insurance,"
99-29, Massachusetts Institute of Technology (MIT), Department of Economics.
- Gordon, Robert J, 1995.
"Is There a Trade-off between Unemployment and Productivity Growth?,"
CEPR Discussion Papers
1159, C.E.P.R. Discussion Papers.
- Robert J. Gordon, 1998. "Is There a Tradeoff between Unemployment and Productivity Growth?," NBER Working Papers 5081, National Bureau of Economic Research, Inc.
- Francesco Daveri & Guido Tabellini, .
"Unemployment, Growth and Taxation in Industrial Countries,"
122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 47-104, 04.
- Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
- Strobl, Eric & Walsh, Frank, 2007.
"Estimating the shirking model with variable effort,"
Elsevier, vol. 14(3), pages 623-637, June.
- STROBL, Eric & WALSH, Frank, 2003. "Estimating the shirking model with variable effort," CORE Discussion Papers 2003075, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Alison Booth & Yu-Fu Chen & Gylfi Zoega, 1999.
"Hiring And Firing: A Tale Of Two Thresholds,"
Dundee Discussion Papers in Economics
095, Economic Studies, University of Dundee.
- Jim Malley & Hassan Molana, 2000.
"Monopolistic Competition, Efficiency Wages and Perverse Effects of Demand Shock,"
2000_20, Business School - Economics, University of Glasgow, revised Feb 2001.
- Jim Malley & Hassan Molana, 2001. "Monopolistic Competition, Efficiency Wages and Perverse Effects of Demand Shock," Dundee Discussion Papers in Economics 122, Economic Studies, University of Dundee.
- Jim Malley & Hassan Molana, 2001. "Monopolistic Competition, Efficiency Wages and Perverse Effects of Demand Shock," CESifo Working Paper Series 475, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bram Boskamp).
If references are entirely missing, you can add them using this form.