Standard economic wisdom generally stresses the benefits of increased competition on the product market. This paper proposes a model of monopolistic competition with an endogenous determination of workers flows in and out of unemployment, where wages are determined according to an efficiency...

When employers can incur losses from the labor relationship in a gift exchange game, they offer lower wages on average than in a no-loss relationship. Taking employers’ risk of losing money into account, employees exert more effort per wage unit.

No abstract.

We study the behavior of employers and employees in a gift exchange game and find that employers offer lower wages when there is the risk of losing money. This, however, does not lead to lower effort level choices. In fact, effort per wage unit is significantly higher in the treatment with...

This paper analyzes the effects of the minimum wage on wage inequality, relative employment and over-education. We show that over-education can be generated endogenously and that an increase in the minimum wage can raise both total and low-skill employment, and produce a fall in inequality....

This paper accounts for work sharing and unemployment in an efficiency wage model.The Solow condition holds when working hours are exogenous. Under the assumption of endogeneity and using general forms for the effort and cost functions, we prove that work sharing may have a reducing impact on...

The importance of high salaries to circumvent bureaucratic corruption has been widely recognized in the policy debate. Yet, there appears to be much reluctance when it comes to the implementation. In this paper, we argue that deterring corruption through wage incentives may become prohibitively...

We consider a dual labor markets model in which the primary sector requires the presence of efficiency wage, while the secondary sector is competitive. We show that the Solow condition does not hold in a Stackelberg equilibrium where the primary sector acts as a leader and the secondary one as a...

The efficiency wage hypothesis is tested by using one of the recently developed methods to measure technical efficiency. We use panel data on 40 Turkish cement plants for the period 1980-1995. The predictions of the efficiency wage hypothesis are tested in two ways: estimation of wage augmented...

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 union-firm bargaining. In the former, a (locally) revenue-neutral shift from specific to...