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A Multisector Model of Efficiency Wages

  • Walsh, Frank

The pattern of effort and wages is derived in a multisector efficiency wage model. Firms choose effort endogenously. Easily monitored or low-turnover jobs have high effort and may have low wages in equilibrium. Empirical wage differentials from a measure of supervision are smaller than observed industry differentials that have been attributed to efficiency wage models and are closer to those predicted by the model. Workers can search for and avail of on-the-job offers. If sectors grow at different rates or the unemployment rate changes, the pattern of wage differentials is unaffected. Copyright 1999 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/209924
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 17 (1999)
Issue (Month): 2 (April)
Pages: 351-76

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Handle: RePEc:ucp:jlabec:v:17:y:1999:i:2:p:351-76
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  1. James B. Rebitzer & Lowell J. Taylor, 1991. "The Consequences of Minimum Wage Laws: Some New Theoretical Ideas," NBER Working Papers 3877, National Bureau of Economic Research, Inc.
  2. George A. Akerlof & Lawrence F. Katz, 1988. "Workers' Trust Funds and the Logic of Wage Profiles," NBER Working Papers 2548, National Bureau of Economic Research, Inc.
  3. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  4. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 235-290 National Bureau of Economic Research, Inc.
  5. Summers, Lawrence H. & Dickens, William T. & Katz, Lawrence F. & Lang, Kevin, 1989. "Employee Crime and the Monitoring Puzzle," Scholarly Articles 3645199, Harvard University Department of Economics.
  6. Brunello, Giorgio, 1995. "The Relationship between Supervision and Pay: Evidence from the British New Earnings Survey," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 309-21, August.
  7. Miles S. Kimball, 1989. "Labor Market Dynamics When Unemployment Is A Worker Discipline Device," NBER Working Papers 2967, National Bureau of Economic Research, Inc.
  8. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
  9. Guillermo A. Calvo, 1985. "The Inefficiency of Unemployment: The Supervision Perspective," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 373-387.
  10. Blondal, Sveinbjorn & Pearson, Mark, 1995. "Unemployment and Other Non-employment Benefits," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 136-69, Spring.
  11. Alan B. Krueger, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 75-101.
  12. Neal, Derek, 1993. "Supervision and Wages across Industries," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 409-17, August.
  13. Alan Manning, 1995. "How Do We Know That Real Wages Are Too High?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1111-1125.
  14. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
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