This paper considers a dynamic matching model with imperfectly observable worker effort. In equilibrium, the wage distribution is truncated from below by a no-shirking condition. This downward wage rigidity induces the same type of inefficient churning and "contractual fragility" as in Ramey and...

We analyse the implications of habit formation relating to wages in a multi-period efficiency-wage model. If employees have such preferences, their existence provides firms with incentives to raise wages and reduce employment over time. Greater intensity does not necessarily have the same...

Purpose – The purpose of the paper was to establish the implications of globalisation for labour markets when efficiency wages create endogenous wage rigidity and to re-examine the credibility of the arguments that call for deregulation, more wage flexibility and less social protection in this...

Purpose – The purpose of the paper was to establish the implications of globalisation for labour markets when efficiency wages create endogenous wage rigidity and to re‐examine the credibility of the arguments that call for deregulation, more wage flexibility and less social protection in...