Empirical Tests of Efficiency Wage Models
Two-digit manufacturing industry-level production functions are used to test efficiency wage propositions. Conclusive tests require functional forms which allow differences in elasticities of substitution between observable human capital, wage premia, and other inputs. Results demonstrate that unexplained industry wage premia and higher unemployment rates raise productivity. Wage premia and the human capital wage component cannot be aggregated into a single human capital index. Nevertheless, 88 percent of the productivity effect associated with industry wages can be tied to observable human capital in the industry, with only 12 percent associated with the wage premium. Coauthors are Arne Hallam, Peter F. Orazem, and Elizabeth M. Paterno. Copyright 1998 by The London School of Economics and Political Science
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Volume (Year): 65 (1998)
Issue (Month): 257 (February)
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