Efficiency Wages Revisited: The Internal Reference Perspective
The missing wage rigidity in general equilibrium models of efficiency wages is an artifact of the external wage reference perspective conventionally adopted by the literature. Efficiency wage models based on an internal wage reference perspective are capable of generating strong wage rigidity. We propose a structural model of efficiency wages that is broadly consistent with the reported evidence on fairness in labour relations and rent-sharing. Our model provides a robust explanation for wage rigidity and procyclical effort. It also rationalizes reciprocal behaviour by workers and the observation that firm productivity is a significant predictor of wage setting.
|Date of creation:||Aug 2004|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780199279173, December.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, December.
- Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
- Jean-Pierre Danthine & Andre Kurmann, 2004.
"Fair Wages in a New Keynesian Model of the Business Cycle,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 107-142, January.
- Jean-Pierre DANTHINE & André KURMANN, 2002. "Fair Wages in a New Keynesian Model of the Business Cycle," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 02.10, Université de Lausanne, Faculté des HEC, DEEP.
- Jean-Pierre Danthine & André Kurmann, 2003. "Fair Wages in a New Keynesian Model of the Business Cycle," Cahiers de recherche 0320, CIRPEE.
- Danthine, Jean-Pierre & Kurmann, Andre, 2002. "Fair Wages in a New Keynesian Model of the Business Cycle," CEPR Discussion Papers 3423, C.E.P.R. Discussion Papers.
- Fabrice Collard & David de la Croix, 2000.
"Gift Exchange and the Business Cycle: The Fair Wage Strikes Back,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 166-193, January.
- Collard, Fabrice & de la Croix, David, 1996. "Gift exchange and the business cycle: the fair wage strikes back," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Apr 1997.
- Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
- 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.
- George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4503. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.