This study derives a reduced-form equation for the aggregate supply curve from a model in which firms pay efficiency wages and workers have imperfect information about average wages at other firms. If specific assumptions are made about workers’ expectations of average wages and about...

Applicants for any given job are more or less suited to fill it, and the firm will select the best among them. Increasing the wage offer attracts more applicants and makes it possible to raise the hiring standard and improve the productivity of the staff. Wages that optimize on the trade-off...

We propose a modified version of the Shapiro-Stiglitz’s (1984) efficiency wage model by introducing temporary contracts in the standard setup. New theoretical insights emerge on the incentive problem faced by workers and firms. We argue that the existence of temporary contracts broaden the...

In der Öffentlichkeit wird oft die These vertreten, daß die zunehmende Ungleichheit der Lohneinkommen ökonomisch geboten, wenn auch gesellschaftspolitisch bedenklich sei. In diesem Beitrag wird gezeigt, daß die Lohnbildung in modernen Arbeitsmärkten nicht dem Prinzip der kompensierenden...

A labor market is considered that is characterized by job competition over job ladders. Firms paying more for comparable jobs can attract workers with better background characteristics (with general human capital) and will lose fewer trained workers (with general and firm-specific human...

A firm may reduce its turnover and the entailed turnover costs by raising wages. A rise in unemployment reduces turnover and turnover costs in a similar way. The interaction of these effects leads – in presence of perfectly flexible wages – to a stable equilibrium in the labor market which...

This note, published in 1995, assesses the problems that might be entailed by the introduction of the European monetary union. It is argued that wage pressure will not be diminished by forming the union, and the stagflation problem that lies at the root of the rising trend in unemployment will...

Wage formation is often analyzed by assuming that wage differentials reflect productivity differentials intrinsic to the workers, like differences in skill or qualification. Observed industry and firm effects on wages suggests, however, that wage differentials may result from causes rather...

This paper develops a theory of stagflation, based on turnover-efficiency-wage theory. In these theories, wages are forward-looking, i.e., set to keep incumbents with the firm. The employed workers apply for better jobs and compete with unemployed applicants. An employed applicant is, however,...

We present an experimental test of a shirking model where monitoring intensity is endogenous and effort a continuous variable. Wage level, monitoring intensity and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result,...