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Efficiency Wages, Interfirm Comparison, and Unemployment

Author

Listed:
  • Kare Johansen

    () (Department of Economics, Norwegian University of Science and Technology)

  • Bjarne Strom

    () (Department of Economics, Norwegian University of Science and Technology,)

Abstract

The paper presents an efficiency wage model where worker effort depends on own wages relative both to wages of other workers in the firm and to similar workers in other firms. First, we show how the Solow conditions are modified if internal comparison effects are at work. Second, we discuss the effect of internal wage comparison on wage inequality within firms. Third, we study unemployment and relative wage determination within a general equilibrium model, and analyze the effect of technological change and various tax policies on equilibrium unemployment and relative wages. Finally, the short-run effects of aggregate demand shocks are analyzed.

Suggested Citation

  • Kare Johansen & Bjarne Strom, 2001. "Efficiency Wages, Interfirm Comparison, and Unemployment," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 387-402, October.
  • Handle: RePEc:sej:ancoec:v:68:2:y:2001:p:387-402
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    Cited by:

    1. Andrew E. Clark & David Masclet & Marie Claire Villeval, 2010. "Effort and Comparison Income: Experimental and Survey Evidence," ILR Review, Cornell University, ILR School, vol. 63(3), pages 407-426, April.
    2. Andrew Clark & Davis Masclet & Marie-Claire Villeval, 2006. "Effort and Comparison Income : Survey and Experimental Evidence," Working Papers 0601, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Andrew E. Clark & David Masclet & Marie Claire Villeval, 2006. "Effort and comparison income: Survey and experimental evidence," Working Papers halshs-00590552, HAL.
    4. Andrew Clark, 1995. "L'utilité est-elle relative ? Analyse à l'aide de données sur les ménages," Économie et Prévision, Programme National Persée, vol. 121(5), pages 151-164.

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