Labor Market Dynamics When Unemployment Is A Worker Discipline Device
Efficiency wage models of the effort elicitation type have important implications for labor market dynamics. These models have a wide array of discontinuous sunspot equilibria driven by extraneous variables, in addition to well-behaved equilibria characterized by continuous, slowly adjusting patterns of employment. Many aspects of actual labor markets can be replicated by these models. For example, the longer-run movements they predict in employment allow macroeconomic evidence for a large labor supply elasticity to be reconciled with panel data evidence for a small labor supply elasticity. Many testable, but as yet untested predictions about labor market dynamics can also be generated.
|Date of creation:||May 1989|
|Date of revision:|
|Publication status:||published as American Economic Review, 84 (4), September 1994, pp. 1045-1059|
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