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Efficiency Wages and the Wage Structure

  • Alan B. Krueger
  • Lawrence H. Summers

This paper examines differences in pay for equally skilled workers in different industries. The major finding is that there is substantial dispersion in wages across industries, even after allowing for measured and unmeasured labor quality, working conditions, fringe benefits, transitory demand shocks, threat of unionization, union bargaining power, firm size and other factors. Some direct evidence in favor of efficiency wage theories is presented. The evidence suggests that industry wage differentials are successful in eliciting better performance through reduced turnover and increased effort.

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File URL: http://www.nber.org/papers/w1952.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1952.

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Date of creation: Jun 1986
Date of revision:
Publication status: published as Krueger and Summers, "Efficiency Wages and the Inter-Industry Wage Structure," from Econometrica, Vol. 56, No. 2, March 1988, pp. 259-293.
Handle: RePEc:nbr:nberwo:1952
Note: LS EFG
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  1. Cain, Glen G, 1976. "The Challenge of Segmented Labor Market Theories to Orthodox Theory: A Survey," Journal of Economic Literature, American Economic Association, vol. 14(4), pages 1215-57, December.
  2. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
  3. Mellow, Wesley & Sider, Hal, 1983. "Accuracy of Response in Labor Market Surveys: Evidence and Implications," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 331-44, October.
  4. Richard B. Freeman, 1983. "Longitudinal Analyses of the Effects of Trade Unions," NBER Working Papers 1207, National Bureau of Economic Research, Inc.
  5. Jeremy I. Bulow & Lawrence H. Summers, 1985. "A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment," NBER Working Papers 1666, National Bureau of Economic Research, Inc.
  6. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-78, June.
  7. Robert S. Smith, 1979. "Compensating Wage Differentials and Public Policy: A Review," ILR Review, Cornell University, ILR School, vol. 32(3), pages 339-352, April.
  8. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-52, October.
  9. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 94(1), pages 113-134.
  10. repec:sae:ilrrev:v:32:y:1979:i:3:p:339-362 is not listed on IDEAS
  11. Robert E. Hall, 1975. "The Rigidity of Wages and the Persistence of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 301-350.
  12. William T. Dickens & Kevin Lang, 1985. "Testing Dual Labor Market Theory: A Reconsideration of the Evidence," NBER Working Papers 1670, National Bureau of Economic Research, Inc.
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