Efficiency Wage Models of the Labor MarketGeorge A. Akerlof, Janet L. Yellen Cambridge University Press, 1986 M11 28 - 178 pages One of the more troubling aspects of the ferment in macroeconomics that followed the demise of the Keynesian dominance in the late 1960s has been the inability of many of the new ideas to account for unemployment remains unexplained because equilibrium in most economic models occurs with supply equal to demand: if this equality holds in the labor market, there is no involuntary unemployment. Efficiency Wage Models of the Labor Market explores the reasons why there are labor market equilibria with employers preferring to pay wages in excess of the market-clearing wage and thereby explains involuntary unemployment. This volume brings together a number of the important articles on efficiency wage theory. The collection is preceded by a strong, integrative introduction, written by the editors, in which the hypothesis is set out and the variations, as described in subsequent chapters, are discussed. |
Contents
The Theory of Underemployment in Densely Populated Backward Areas | 22 |
Another Possible Source of Stickiness | 41 |
Equilibrium Unemployment as a Worker Discipline Device | 45 |
Involuntary Unemployment as a PrincipalAgent Equilibrium | 57 |
Labor Contracts as Partial Gift Exchange | 66 |
A Model of the Natural Rate of Unemployment | 93 |
Job Queues and Layoffs in Labor Markets with Flexible Wages | 102 |
Hierarchy Ability and Income Distribution | 115 |
Incentives Productivity and Labor Contracts | 135 |
Work Incentives Hierarchy and Internal Labor Markets | 157 |
Common terms and phrases
2-period contract acceptance wages adverse selection age-earnings profile Akerlof American Economic Review Andrew Weiss assume assumption B₁ behavior calories Calvo cash posters certainty contract choose constraint demand Edmund Phelps efficiency unit efficiency wage hypothesis efficiency wage models effort employed employees equation equilibrium expected utility explain Figure firm's Hence hierarchic higher wage hired implicit contract incentive effects income increase indifference curves individual involuntary unemployment job queues labor force labor market labor supply Lazear macroeconomics marginal product market-clearing maximize ment Microeconomic minimum wage monitoring moral hazard norms number of workers observed optimal contract optimum output paid performance period ployment present value problem production workers productivity curve profit profit-maximizing result risk aversion salary workers self-employed shirking slope standard status sticky prices Stiglitz supervisors theory tion turnover two-layer unem unemployed workers unemployment rate utility function variables w₁ W₂ wage and salary wage rate zero