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Slowing Down

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  • Yu-Fu Chen
  • Gylfi Zoega

Abstract

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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    File URL: http://www.dundee.ac.uk/media/dundeewebsite/economicstudies/documents/discussion/DDPE_266.pdf
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    References listed on IDEAS

    as
    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. Jason DeBacker, 2012. "Political parties and political shirking," Public Choice, Springer, vol. 150(3), pages 651-670, March.
    5. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Wage setting; shirking; finite horizons;
    All these keywords.

    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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