Advanced Search
MyIDEAS: Login

Fairness as a source of hysteresis in employment and relative wages

Contents:

Author Info

  • Peter Skott

    ()
    (University of Massachusetts Amherst)

Abstract

This paper analyses the influence of norms of fairness on wage formation. Fairness is defined by `real-wage' and `relative-wage' norms that relate wage offers to workers' own current wage and to the wages of other groups of workers, and, to avoid shirking, firms pay fair wages. The wage norms change endogenously, and the result is hysteresis with respect to both employment and the distribution of wages. An extension of the model that allows `induced overeducation' may help explain trends in wage inequality.

Download Info

If 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.
File URL: http://www.umass.edu/economics/publications/2004-04.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2004-04.

as in new window
Length:
Date of creation: 2004
Date of revision:
Handle: RePEc:ums:papers:2004-04

Contact details of provider:
Postal: Thompson Hall, Amherst, MA 01003
Phone: (413)545-2590
Fax: (413)545-2921
Email:
Web page: http://www.umass.edu/economics
More information through EDIRC

Related research

Keywords: Wage norms; fairness; hysteresis; overeducation; wage inequality; unemployment;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. A.B. Atkinson, 1998. "The distribution of income in industrialized countries," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 11-32.
  2. James K. Galbraith, 1997. "Time to Ditch the NAIRU," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 93-108, Winter.
  3. F Green & Steven McIntosh & Anna Vignoles, 1999. "Overeducation and Skills - Clarifying the Concepts," CEP Discussion Papers dp0435, Centre for Economic Performance, LSE.
  4. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
  5. George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers 118, Board of Governors of the Federal Reserve System (U.S.).
  6. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  7. Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series 336, CESifo Group Munich.
  8. Rabin, Matthew, 1997. "Psychology and Economics," Department of Economics, Working Paper Series qt8jd5z5j2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  9. Daly, Mary C. & Buchel, Felix & Duncan, Greg J., 2000. "Premiums and penalties for surplus and deficit education: Evidence from the United States and Germany," Economics of Education Review, Elsevier, vol. 19(2), pages 169-178, April.
  10. Hersch, Joni, 1991. "Education Match and Job Match," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 140-44, February.
  11. Laurence Ball & Robert Moffitt, 2001. "Productivity Growth and the Phillips Curve," NBER Working Papers 8421, National Bureau of Economic Research, Inc.
  12. Newell, A. & Symons, J. S. V., 1987. "Corporatism, laissez-faire and the rise in unemployment," European Economic Review, Elsevier, vol. 31(3), pages 567-601, April.
  13. Paldam, Martin, 1989. " A Wage Structure Theory of Inflation, Industrial Conflicts and Trade Unions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 91(1), pages 63-81.
  14. Paul Auerbach & Peter Skott, . "Skill Asymmetries, Increasing Wage Inequality and Unemployment," Economics Working Papers 2000-18, School of Economics and Management, University of Aarhus.
  15. Edward N. Wolff, 1998. "Technology and the Demand for Skills," Macroeconomics 9810004, EconWPA.
  16. Palley, Thomas I., 1994. "The fair wage-effort hypothesis: Implications for the distribution of income and dual labor markets," Journal of Economic Behavior & Organization, Elsevier, vol. 24(2), pages 195-205, July.
  17. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
  18. Olivier Blanchard & Lawrence F. Katz, 1996. "What We Know and Do Not Know About the Natural Rate of Unemployment," NBER Working Papers 5822, National Bureau of Economic Research, Inc.
  19. Skott, P., 1990. "Efficiency Wages, Mark-up Pricing and Effective Demand," Discussion Paper 1990-26, Tilburg University, Center for Economic Research.
  20. Gordon, Robert J, 1996. "The Time-varying NAIRU and its Implications for Economic Policy," CEPR Discussion Papers 1492, C.E.P.R. Discussion Papers.
  21. Sicherman, Nachum, 1991. ""Overeducation" in the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 101-22, April.
  22. Bewley, Truman F., 1998. "Why not cut pay?," European Economic Review, Elsevier, vol. 42(3-5), pages 459-490, May.
  23. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  24. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
  25. Grubb, David B, 1986. "Topics in the OECD Phillips Curve," Economic Journal, Royal Economic Society, vol. 96(381), pages 55-79, March.
  26. Skott, Peter, . "Distributional consequences of neutral shocks to economic activity in a model with efficiency wages and overeducation," Economics Working Papers 2003-5, School of Economics and Management, University of Aarhus.
  27. Grubb, David B & Jackman, Richard A & Layard, Richard G, 1982. "Causes of the Current Stagflation," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 707-30, Special I.
  28. Shafir, Eldar & Diamond, Peter & Tversky, Amos, 1997. "Money Illusion," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 341-74, May.
  29. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ums:papers:2004-04. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Saunders).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.