Actual wages typically exceed collectively set standard wages. Standard wages are, therefore, not binding, yet they seem to influence actual wages strongly. An explanation for this phenomenon is offered along the lines of the Fair Wage/Effort Hypothesis proposed by G. Akerlof and J. Yellen...

This paper accounts for work sharing and unemployment in an efficiency wage model.The Solow condition holds when working hours are exogenous. Under the assumption of endogeneity and using general forms for the effort and cost functions, we prove that work sharing may have a reducing impact on...

We consider a dual labor markets model in which the primary sector requires the presence of efficiency wage, while the secondary sector is competitive. We show that the Solow condition does not hold in a Stackelberg equilibrium where the primary sector acts as a leader and the secondary one as a...