Using a New-Keynesian flexi-price model with external habit formation in consumption and labor supply, we identify the channels underlying the Easterlin Paradox (or “Happiness Inertia”, its generalization). These include whether external habit formation is in “difference” or “ratio”...

This paper develops a gifts exchange efficiency wage model in which unions and employers bargain over wages and productivity norms. Unlike other efficiency wage models, involuntary unemployment does not depend on wage rigidity. Rather, in keeping with Keynes, insufficient aggregate demand is...

By explicitly examining the symmetry assumption implicit in much of the efficiency wage literature, a plausible supply-side link between monetary policy and worker productivity is introduced. Specifically, if relative wages influence worker behavior asymmetrically and monetary policy alters...

We present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages. Work effort neither reacts to an increase of the own wage, nor to a positive or negative peer comparison. This result seems at odds with numerous laboratory...

Uruguay is a small economy. Its integration to MERCOSUR has increased the exposure to regional macroeconomic inestability. The aim of this paper is to assess the impact of regional integration on labour market and poverty. We estimated wage differentials between labour categories, finding a 60%...

We examine the effects of two different types of commodity taxation, specific and ad valorem, on wages and profits. We analyze two models of wage determination, one with efficiency wage setting and one with bargaining between a union and a firm. In the former, a (locally) revenue-neutral shift...

This paper merges a cost-based model of union bargaining power, in which bargaining power reflects relative costs of agreement and disagreement facing unions and management, with an efficiency-wage model, in which effort per hour responds positively to the real wage. Union bargaining alters the...

We analyze to what extent skill heterogeneity in the labor market with different wage formation mechanisms can explain the features of the Spanish labor market. The model assumes two types of workers with differences in skills. Skilled labor sets wages in an efficiency way while unskilled labor...

updated version of paper no 55

We present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages. Work effort neither reacts to an increase of the own wage, nor to a positive or negative peer comparison. This result seems at odds with numerous laboratory...