We introduce an efficiency wage mechanism into an innovation-driven growth model. Due to asymmetric information problems the labour market is segmented and homogeneous workers may be employed either in the non-competitive intermediate sector or in the competitive research sector. We analyse the...

This paper uses a Shapiro-Stiglitz efficiency wage model to analyse the effects of firing costs on wages, employment, expected utility and profits. It considers that the probability of a non-shirker being fired depends on an exogenous shock which follows a two-state Markov process. It finds that...

We introduce an efficiency-wage mechanism into an innovation-driven growth model. Due to informational problems, the labor market is segmented and homogeneous workers may be employed either in a non-competitive intermediate sector or in a competitive research one. We analyze the impact that...