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Different times, different commitments, but the same old practices: failure of the efficiency wage model for socially devoted firms

Author

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  • Fernando Zanella

    (Dept. of Economics & Finance, United Arab Emirates University)

Abstract

After the stabilization plan of 1994, and trade liberalization, the Brazilian inflation rate ped from two figures monthly to a single one annually. Several large capitalization firms began adhering to the Annual Social Audit disclosures, a series of internal and external indicators mostly related to employees' well-being and community. In this paper, we tested the Efficiency Wage Model, shirking version, as per Manchin & Manning (1992) and applied by Kitazawa & Ohta (2002). We observed 84 firms who were members of the Annual Social Audit network from 1997 to 2005. We find that (i) our studied firms are not paying salaries above market level, as indicated by the efficiency wage model, and (ii) the results suggest the use of the bargain model of repetitive negotiation between employers and employees.

Suggested Citation

  • Fernando Zanella, 2008. "Different times, different commitments, but the same old practices: failure of the efficiency wage model for socially devoted firms," Economics Bulletin, AccessEcon, vol. 10(9), pages 1-6.
    • Handle: RePEc:ebl:ecbull:eb-08j50001
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    References listed on IDEAS

    as
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    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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