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The Macroeconomic Consequences of Reciprocity in Labor Relations

  • Jean-Pierre Danthine
  • André Kurmann

We develop and analyze a structural model of efficiency wages founded on reciprocity. Workers are assumed to face an explicit trade-off between the disutility of providing effort and the psychological benefit of reciprocating the gift of a wage offer above some reference level. The model provides a rationale for rent sharing-a feature that is very much present in the data but absent from previous formulations of the efficiency wage hypothesis. This firm-internal perspective on efficiency wages has potentially important macroeconomic consequences: rent-sharing considerations promote wage rigidity, internal amplification and differential responses to technology and demand shocks. Copyright The editors of the "Scandinavian Journal of Economics" 2008 .

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 109 (2008)
Issue (Month): 4 (03)
Pages: 857-881

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Handle: RePEc:bla:scandj:v:109:y:2008:i:4:p:857-881
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