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You Get What You Pay For: Tests of Efficency Wage Theories in the United States and Japan

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  • Levine, David I.

Abstract

This paper utilizes a rich data set on workers and their employers in the US and Japan to test several predictions of efficiency wage theories. The data set incorporates numerous objective and subjective performance measures including turnover, effort, absences, satisfaction, and commitment. It also contains extremely good measures of establishment, worker, and job characteristics. For almost all of the performance measures in both countries efficiency wage theories are supported; that is, workers receiving particularly high wages given their observable characteristics report that they are less likely to quit, more satisfied with their pay, and so forth. The between-establishment component of wages is a more reliable predictor of performance than the within-establishment component.

Suggested Citation

  • Levine, David I., 1991. "You Get What You Pay For: Tests of Efficency Wage Theories in the United States and Japan," Institute for Research on Labor and Employment, Working Paper Series qt9t02v034, Institute of Industrial Relations, UC Berkeley.
    • Handle: RePEc:cdl:indrel:qt9t02v034
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    Cited by:

    1. Lundborg, Per, 2005. "Individual Wage Setting, Efficiency Wages and Productivity in Sweden," Working Paper Series 205, Trade Union Institute for Economic Research.
    2. Mason, Patrick L., 1993. "Variable labor effort, involuntary unemployment, and effective demand," MPRA Paper 11331, University Library of Munich, Germany.
    3. Rebitzer, James B., 1995. "Is there a trade-off between supervision and wages? An empirical test of efficiency wage theory," Journal of Economic Behavior & Organization, Elsevier, vol. 28(1), pages 107-129, September.

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