Efficiency wage theory predicts that the wage per unit of effort will be lower in intensively monitored sectors. This wage differential will increase in effort. Using employer-employee matched data from Ghana we provide evidence supporting this hypothesis.

In monopsony models of the labour market either a minimum wage or an employment subsidy financed by a lump sum tax on profits can achieve the efficient level of employment and output. Incorporating working conditions into a monopsony model where higher wages raise firm labour supply, but less...