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Labour Turnover, Wage Structure, and Natural Unemployment

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  • Schlicht, Ekkehart

Abstract

A firm may reduce its turnover and the entailed turnover costs by raising wages. A rise in unemployment reduces turnover and turnover costs in a similar way. The interaction of these effects leads – in presence of perfectly flexible wages – to a stable equilibrium in the labor market which clears the market but accidentally. Unemployment increases with increases in labor mobility. Wage differentials arise between perfectly identical workers working in different firms that face different turnover costs.

Suggested Citation

  • Schlicht, Ekkehart, 1978. "Labour Turnover, Wage Structure, and Natural Unemployment," Munich Reprints in Economics 1255, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenar:1255
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    More about this item

    Keywords

    efficiency wages; Solow-condition; turnover;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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