The main focus of the “wage bargaining” literature has been on the factors promoting real wage flexibility at the macro level. This paper, in contrast, examines the microeconomic issues of wage bargaining. More specifically, this paper appraises the following questions: (a) what are the...

We construct a model integrating the efficiency wage model of Shapiro-Stiglitz (1984) with the matching-bargaining models of Diamond, Mortensen and Pissarides (DMP). Firms and workers form pairwise matches, workers may shirk on the job, and the wage is set in an asymmetric Nash bargain over the...

Redundancy payments for collective dismissals are incorporated into a Shapiro-Stiglitz model of efficiency wages. It is shown that a fixed payment will lower wages, leave employment and welfare unaffected if there are no wage-dependent taxes, no additional firing costs and if unemployment...

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,...

We study an important mechanism underlying employee referrals into informal low skilled jobs in developing countries. Employers can exploit social preferences between employee referees and potential workers to improve discipline. The profitability of using referrals increases with referee stakes...

This paper formalizes the use of flexible labor contracts in an efficiency wage framework and derives market dualism as an endogenous outcome. By allowing temporary contracts to be either renewed or converted into permanent contracts, new theoretical insights emerge both on the equilibrium wage...

This paper considers the optimal level of firm-specific training by taking into account the positive effect of training on the expected duration of workers current employment. In the framework of an efficiency wage model, a short expected job tenure represents a disamenity that reduces the...

Recent empirical work has shown that there exists a negative relation between wages and unemployment estimated across regions. Our model recognises the spatial dimension of the so-called wage curve by using a Hotelling/Salop framework in which a finite number of firms compete for heterogeneous...