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Is Worker Behaviour Consistent with Efficiency Wages?


  • Drago, Robert
  • Heywood, John S


A model of worker behavior under efficiency wages is presented and the fundamental hypotheses identified. Using survey data from the United States, a cross-sectional testing equation is estimated. While not uniformly successful, the fundamental results emerge as a strong positive partial correlation between reported effort and the wage rate of the employee and between that same effort measure and degree of monitoring. These results, together with a weaker negative partial correlation between reported effort and the chances for reemployment after dismissal, are taken as evidence consistent with the efficiency wage model. Copyright 1992 by Scottish Economic Society.

Suggested Citation

  • Drago, Robert & Heywood, John S, 1992. "Is Worker Behaviour Consistent with Efficiency Wages?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(2), pages 141-153, May.
  • Handle: RePEc:bla:scotjp:v:39:y:1992:i:2:p:141-53

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    References listed on IDEAS

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    5. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    6. Berglof Erik & Roland Gerard, 1995. "Bank Restructuring and Soft Budget Constraints in Financial Transition," Journal of the Japanese and International Economies, Elsevier, vol. 9(4), pages 354-375, December.
    7. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    8. Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
    9. Cornelli, F. & Portes, R. & Schaffer, M., 1996. "The Capital Structure of Firms in Central and Eastern Europe," DELTA Working Papers 96-05, DELTA (Ecole normale supérieure).
    10. Schaffer, Mark E., 1998. "Do Firms in Transition Economies Have Soft Budget Constraints? A Reconsideration of Concepts and Evidence," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 80-103, March.
    11. Michael Devereux & Fabio Schiantarelli, 1990. "Investment, Financial Factors, and Cash Flow: Evidence from U.K. Panel Data," NBER Chapters,in: Asymmetric Information, Corporate Finance, and Investment, pages 279-306 National Bureau of Economic Research, Inc.
    12. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    13. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
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    Cited by:

    1. Meghan Millea, 2002. "Disentangling the wage-productivity relationship: Evidence from select OECD member countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 8(4), pages 314-323, November.
    2. Heywood, John S. & Siebert, W. Stanley & Wei, Xiangdong, 2013. "The Consequences of a Piece Rate on Quantity and Quality: Evidence from a Field Experiment," IZA Discussion Papers 7660, Institute for the Study of Labor (IZA).
    3. Lang, Oliver, 1993. "Lohnprämien und Leistungsbereitschaft: Ein latentes Strukturmodell zur empirischen Überprüfung der Shirking-Hypothese," ZEW Discussion Papers 93-17, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Green, Francis & McIntosh, Steven, 2001. "The intensification of work in Europe," Labour Economics, Elsevier, vol. 8(2), pages 291-308, May.
    5. Bart Cockx & Matteo Picchio, 2013. "Scarring effects of remaining unemployed for long-term unemployed school-leavers," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 176(4), pages 951-980, October.
    6. Agell, Jonas & Bennmarker, Helge, 2002. "Wage Policy and Endogenous Wage Rigidity: A Representative View from the Inside," Research Papers in Economics 2002:12, Stockholm University, Department of Economics.
    7. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    8. Goerke, Laszlo, 2000. "On the structure of unemployment benefits in shirking models," Labour Economics, Elsevier, vol. 7(3), pages 283-295, May.
    9. 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.
    10. Denis Chênevert & Michel Tremblay, 2011. "Between universality and contingency: An international study of compensation performance," International Journal of Manpower, Emerald Group Publishing, vol. 32(8), pages 856-878, November.
    11. Fernie, Sue & Metcalf, David, 1998. "(Not)hanging on the telephone: payment systems in the new sweatshops," LSE Research Online Documents on Economics 20275, London School of Economics and Political Science, LSE Library.
    12. Bagchi Aniruddha & Bandyopadhyay Siddhartha, 2016. "Workplace Deviance and Recession," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(1), pages 47-81, January.
    13. Thalmaier, Anja, 1999. "Bestimmungsgründe von Fehlzeiten: Welche Rolle spielt die Arbeitslosigkeit?," IZA Discussion Papers 62, Institute for the Study of Labor (IZA).
    14. Sue Fernie & David Metcalf, 1998. "(Not)Hanging on the Telephone: Payment systems in the New Sweatshops," CEP Discussion Papers dp0390, Centre for Economic Performance, LSE.
    15. repec:kap:iaecre:v:8:y:2002:i:4:p:314-323 is not listed on IDEAS

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