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Empirical Tests of Efficiency Wage Models


  • Huang, Tzu-Ling, et al


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

Suggested Citation

  • Huang, Tzu-Ling, et al, 1998. "Empirical Tests of Efficiency Wage Models," Economica, London School of Economics and Political Science, vol. 65(257), pages 125-143, February.
  • Handle: RePEc:bla:econom:v:65:y:1998:i:257:p:125-43

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    References listed on IDEAS

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    6. Franciosi, Robert, et al, 1995. "Fairness: Effect on Temporary and Equilibrium Prices in Posted-Offer Markets," Economic Journal, Royal Economic Society, vol. 105(431), pages 938-950, July.
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    Cited by:

    1. K Clark & M Tomlinson, 2001. "The Determinants of Work Effort: Evidence from the Employment in Britain Survey," The School of Economics Discussion Paper Series 0113, Economics, The University of Manchester.
    2. Carter, Thomas J., 2005. "Money and efficiency wages: the neglected effect of employment on efficiency," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 34(2), pages 199-209, March.
    3. Thomas J. Carter, 2005. "Monetary Policy, Efficiency Wages, and Nominal Wage Rigidities," Eastern Economic Journal, Eastern Economic Association, vol. 31(3), pages 349-359, Summer.
    4. Syed Kanwar Abbas & Asad Zaman, 2005. "Efficiency Wage Hypothesis—The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 1051-1066.
    5. Joydeep Bhattacharya & Shankha Chakraborty, 2005. "What do information frictions do?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 651-675, October.
    6. Fallahi, Firouz & Sakineh, Sojoodi & Mehin Aslaninia, Nasim, 2010. "Determinants of Labor Productivity in Iran’s Manufacturing Firms: With Emphasis on Labor Education and Training," MPRA Paper 27447, University Library of Munich, Germany.

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