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Slowing Down


  • Yu-Fu Chen
  • Gylfi Zoega


We extend the efficiency wage model of Shapiro and Stiglitz to account for the observation that workers’ effort has a tendency to fall when they approach the end of their employment contract. In particular, we find that the efficiency wage increases when the end of term approaches for a given rate of unemployment. We draw implications for the behavior of workers who are approaching retirement, temporary employment contracts, and the advance notice of impending job loss.

Suggested Citation

  • Yu-Fu Chen & Gylfi Zoega, 2012. "Slowing Down," Dundee Discussion Papers in Economics 266, Economic Studies, University of Dundee.
  • Handle: RePEc:dun:dpaper:266

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    References listed on IDEAS

    1. Benoit Dostie, 2011. "Wages, Productivity and Aging," De Economist, Springer, vol. 159(2), pages 139-158, June.
    2. Fair, Ray C, 1994. "How Fast Do Old Men Slow Down?," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 103-118, February.
    3. Ray Fair, 2004. "Estimated Age Effects in Athletic Events and Chess," Yale School of Management Working Papers amz2481, Yale School of Management, revised 01 Aug 2007.
    4. Addison, John T & Chilton, John B, 1997. "Nondisclosure as a Contract Remedy: Explaining the Advance-Notice Puzzle," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 143-164, January.
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    More about this item


    Wage setting; shirking; finite horizons;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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