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A Simple Test of the Shirking Model

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  • Alan Manning
  • J Thomas

Abstract

Although popular in some circles, efficiency wage models of the labour market have proved surprisingly difficult to test and direct evidence for the central tenets of the theory is rare to non-existent. In this paper we propose a simple test of the Shapiro-Stiglitz shirking model which is based on the following idea. In the traditional search model the distribution of accepted wages should be truncated below by the reservation wage. But, if shirking is important then the employer will never want to employ a worker at their reservation wage and the distribution of accepted wages should be truncated below by the reservation wage plus something. That something is a measure of the importance of shirking. We test this prediction using data from the UK Survey of Incomes In and Out of Work. The results are not particularly supportive of the shirking model.

Suggested Citation

  • Alan Manning & J Thomas, 1997. "A Simple Test of the Shirking Model," CEP Discussion Papers dp0374, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0374
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    Cited by:

    1. Barbara Petrongolo & Christopher Pissarides, 2006. "Scale Effects in Markets with Search," Economic Journal, Royal Economic Society, vol. 116(508), pages 21-44, January.
    2. Rocheteau, Guillaume, 2001. "Equilibrium unemployment and wage formation with matching frictions and worker moral hazard," Labour Economics, Elsevier, vol. 8(1), pages 75-102, January.
    3. Andreas P. Georgiadis, 2006. "Is there a Wage-Supervision Trade-Off? Efficiency Wages Evidence From the 1990 British Workplace Industrial Relations Survey," The Centre for Market and Public Organisation 06/152, Department of Economics, University of Bristol, UK.
    4. Dagmar Brožová, 2016. "Forming the Modern Labour Market Economics: On the Role of Institutionalist Theories," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2016(6), pages 56-68.
    5. Andreas Georgiadis, 2013. "Efficiency Wages and the Economic Effects of the Minimum Wage: Evidence from a Low-Wage Labour Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 962-979, December.

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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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