where efficiency wages lead to equilibrium unemployment, we show that if the elasticity of substitution is less than unity …, there will be a bias towards excessive labor augmenting innovation, resulting in too high unemployment, with convergence to … skilled and unskilled labor is less than unity, and there is efficiency wage unemployment for unskilled labor only, there is …

, that frictions (sand-in-the-wheels) may decrease unemployment and that the equilibrium is determined by two simple …