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Efficiency Wages and Wage Dispersion

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  • Ramaswamy, Ramana
  • Rowthorn, Robert E

Abstract

The efficiency wage hypothesis has normally been used to generate an equilibrium level of unemployment. The authors use it, instead, to generate an equilibrium wage distribution. This paper starts by generalizing the previous work of R. M. Solow in this area. They then use their results on effort-wage elasticities to derive a model of wage dispersion. The wage rate is shown to be an increasing function of the damage potential of workers; that is, workers with the highest damage potential receive the highest wage. The analysis of the equilibrium of the wage distribution provides interesting qualitative insights into the nature of actual wage differentials. Copyright 1991 by The London School of Economics and Political Science.

Suggested Citation

  • Ramaswamy, Ramana & Rowthorn, Robert E, 1991. "Efficiency Wages and Wage Dispersion," Economica, London School of Economics and Political Science, vol. 58(232), pages 501-514, November.
  • Handle: RePEc:bla:econom:v:58:y:1991:i:232:p:501-14
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    Cited by:

    1. Walsh, Frank, 2005. "Monetary shocks with variable effort," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 133-141, March.
    2. Mohamed Jellal & Francois-Charles Wolff, 2003. "Dual Labor Markets And Strategic Efficiency Wage," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 99-112.
    3. Bhaskar, V. & To, Ted, 2003. "Oligopsony and the distribution of wages," European Economic Review, Elsevier, vol. 47(2), pages 371-399, April.
    4. Uwe Jirjahn & Kornelius Kraft, 2010. "Teamwork And Intra-Firm Wage Dispersion Among Blue-Collar Workers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(4), pages 404-429, September.
    5. W Brown & P Marginson & J Welsh, 2001. "The Management of Pay as the Influence of Collective Bargaining Diminishes," Working Papers wp213, Centre for Business Research, University of Cambridge.
    6. Floro Ernesto Caroleo, 2004. "Fondamenti teorici della rigidità salariale nell'ambito dei non market clearing models," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2004(83).
    7. Nocetti, Diego, 2008. "Industrial fatigue Redux," Economics Letters, Elsevier, vol. 99(2), pages 286-289, May.
    8. Jellal, Mohamed, 2014. "Social psychology and gender efficiency wage gap," MPRA Paper 57884, University Library of Munich, Germany.
    9. Jellal, Mohamed & Zenou, Yves, 2000. "A dynamic efficiency wage model with learning by doing," Economics Letters, Elsevier, vol. 66(1), pages 99-105, January.
    10. Dennis Coates & Petr Parshakov, 2016. "Team Vs. Individual Tournaments: Evidence From Prize Structure In Esports," HSE Working papers WP BRP 138/EC/2016, National Research University Higher School of Economics.
    11. Ewing, Bradley T., 1998. "Athletes and work," Economics Letters, Elsevier, vol. 59(1), pages 113-117, April.
    12. Yamamura, Eiji, 2010. "Wage disparity and team performance in the process of industry development: Evidence from Japan’s professional football league," MPRA Paper 27363, University Library of Munich, Germany.
    13. Jellal, Mohamed & Zenou, Yves, 1999. "Efficiency wages and the quality of job matching," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 201-217, June.
    14. Craig A. Depken, II & Lisa E. Haglund, 2011. "Peer Effects in Team Sports: Empirical Evidence From NCAA Relay Teams," Journal of Sports Economics, , vol. 12(1), pages 3-19, February.
    15. Jacob Andrew Loree, 2016. "Determinants of Baseball Success: An Econometric Approach," Business and Economic Research, Macrothink Institute, vol. 6(2), pages 1-12, December.
    16. repec:ebl:ecbull:v:10:y:2004:i:3:p:1-7 is not listed on IDEAS
    17. Egon Franck & Stephan Nüesch, 2007. "Wage Dispersion and Team Performance - An Empirical Panel Analysis," Working Papers 0073, University of Zurich, Institute for Strategy and Business Economics (ISU).
    18. David Berri & R. Jewell, 2004. "Wage inequality and firm performance: Professional basketball's natural experiment," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 32(2), pages 130-139, June.
    19. Víctor M. Montuenga-Gómez & José M. Ramos-Parreño, 2005. "Reconciling the Wage Curve and the Phillips Curve," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 735-765, December.
    20. DepkenII, Craig A., 2000. "Wage disparity and team productivity: evidence from major league baseball," Economics Letters, Elsevier, vol. 67(1), pages 87-92, April.
    21. Faria, Joao & Jellal, Mohamed, 2009. "Dynamic of Employment and Wages Incentives," MPRA Paper 17183, University Library of Munich, Germany.
    22. Caruso, Raul & Carlo, Bellavite Pellegrini & Marco, Di Domizio, 2016. "Does diversity in the payroll affect soccer teams’ performance? Evidence from the Italian Serie A," MPRA Paper 75644, University Library of Munich, Germany.
    23. Jellal, Mohamed, 2014. "Agglomeration economies and optimal efficiency wage," MPRA Paper 57836, University Library of Munich, Germany.
    24. repec:bla:coecpo:v:36:y:2018:i:1:p:192-199 is not listed on IDEAS

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