Higher wages increase labor costs but improve the productivity of the labor force through several channels. If firms take this into account and set their wages accordingly, the resulting wages may fail to adjust demand and supply but may engender phenomena like over-education, discrimination,...

New information and communication technologies, we argue, have been 'power-biased': they have allowed firms to monitor low-skill workers more closely, thus reducing the power of these workers. An efficiency wage model shows that 'power-biased technical change' in this sense may generate rising...

A firm that faces insufficient supply of labor can either increase the wage offer to attract more applicants, or reduce the hiring standard to enlarge the pool of potential employees, or do both. This simultaneous adjustment of wages and hiring standards has been emphasized in a classical...

Wage Dispersion and Efficiency. It is often assumed that markets generate efficient allocations, but these are not necessarily fair. The widening of wage differentials that is currently observed is interpreted in this manner: Skill-biased technological progress increases demand for skilled work...