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Growth and unemployment in a shirking efficiency wage model

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  • Michelle Alexopoulos

Abstract

The relationship between growth and unemployment in a general equilibrium shirking efficiency wage model is explored. In contrast to past work on this subject, detected shirkers are not dismissed but instead incur a monetary punishment. As a result of this modification, the model can account for a stable rate of unemployment when there is positive population growth and-or technological growth in the economy. Moreover, I show that institutions and policies that limit the ability of firms to punish detected shirkers or restrict their use of discretionary bonuses can increase unemployment and reduce the economy's long run growth rate.

Suggested Citation

  • Michelle Alexopoulos, 2003. "Growth and unemployment in a shirking efficiency wage model," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 728-746, August.
  • Handle: RePEc:cje:issued:v:36:y:2003:i:3:p:728-746
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    References listed on IDEAS

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    Cited by:

    1. Brecher, Richard A. & Chen, Zhiqi & Choudhri, Ehsan U., 2010. "A dynamic model of shirking and unemployment: Private saving, public debt, and optimal taxation," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1392-1402, August.
    2. Raurich, Xavier & Sorolla, Valeri, 2014. "Growth, unemployment and wage inertia," Journal of Macroeconomics, Elsevier, pages 42-59.
    3. Tetsugen Haruyama & Campbell Leith, 2010. "Unemployment And The Productivity Slowdown: An Effciency Wage Perspective," The Japanese Economic Review, Japanese Economic Association, vol. 61(3), pages 301-319.
    4. William Scarth, 2005. "Fiscal Policy Can Raise Both Employment and Productivity," International Productivity Monitor, Centre for the Study of Living Standards, vol. 11, pages 39-46, Fall.

    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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