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The Macroeconomic Consequences of Reciprocity in Labour Relations

  • Danthine, Jean-Pierre
  • Kurmann, Andre

We develop and analyse a structural model of efficiency wages founded on reciprocity. Workers are assumed to face an explicit trade-off between the disutility of providing effort and the psychological benefit of reciprocating the gift of a wage offer above some reference level. The model provides a rationale for rent sharing -- a feature that is very much present in the data but absent from previous formulations of the efficiency wage hypothesis. This firm-internal perspective on efficiency wages has important macroeconomic consequences: rent-sharing considerations promote wage rigidity, internal amplification and asymmetric responses to technology and demand shocks.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5174.

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Date of creation: Aug 2005
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Handle: RePEc:cpr:ceprdp:5174
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