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The Macroeconomic Consequences of Reciprocity in Labor Relations

  • Jean-Pierre Danthine
  • André Kurmann

We develop and analyze a structural model of effciency 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 effciency wage hypothesis. This firm-internal perspective on effciency 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 Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 05.08.

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Length: 34 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:lau:crdeep:05.08
Contact details of provider: Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: +41-21-692.33.65
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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