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Is the Efficiency Wage Hypothesis Valid for Developing Countries? Evidence from the Turkish Cement Industry

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  • Seref Saygili

Abstract

The efficiency wage hypothesis is tested by using one of the recently developed methods to measure technical efficiency. We use panel data on 40 Turkish cement plants for the period 1980-1995. The predictions of the efficiency wage hypothesis are tested in two ways: estimation of wage augmented production frontiers and the simultaneous estimation of a production function together with inefficiency effects. Our empirical analysis shows that the wage level is one of the significant factors contributing to the output and technical efficiency of plants in the cement industry in Turkey.

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File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/9810.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 9810.

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Date of creation: Apr 1998
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Handle: RePEc:ukc:ukcedp:9810

Contact details of provider:
Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/

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Related research

Keywords: Efficiency Wage; Stochastic Production Function with Composed Errors; Technical Efficiency;

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References

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  1. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
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  8. Harry J. Holzer, 1990. "Wages, Employer Costs, and Employee Performance in the Firm," NBER Working Papers 2830, National Bureau of Economic Research, Inc.
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  12. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
  13. Orszag, J. Michael & Zoega, Gylfi, 1996. "Wages ahead of demand," Economics Letters, Elsevier, vol. 53(3), pages 341-347, December.
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  16. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  17. Bauer, Paul W., 1990. "Recent developments in the econometric estimation of frontiers," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 39-56.
  18. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  19. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
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  22. Cappelli, Peter & Chauvin, Keith, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 769-87, August.
  23. George A. Akerlof & Andrew K. Rose & Janet L. Yellen, 1988. "Job Switching and Job Satisfaction in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 495-594.
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Cited by:
  1. Simarmata, Djamester A., 2012. "Appropriate Wage to Economies of Scale for Growth: An Exploratory Study on New Paradigm for Development," MPRA Paper 41581, University Library of Munich, Germany.
  2. Justesen, Michael & Verner, Dorte, 2007. "Factors impacting youth development in Haiti," Policy Research Working Paper Series 4110, The World Bank.
  3. Binaykumar Ray & B. Sudhakara Reddy, 2012. "Technical productivity analysis for cement industry at firm level," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-002, Indira Gandhi Institute of Development Research, Mumbai, India.

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