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International Advances in Economic Research. The aim of New Keynesian theorists is to obtain Keynesian results on the basis of maximizing behavior. Accordingly, the New Keynesian shirking models depict a world of fully rational maximizing agents where equilibrium unemployment is the main consequence of the payment of efficiency wages. The problem is that oversimplified nature of most shirking models has until now prevented a full investigation of the interdependence of unemployment, the effort supplied by workers and labor demand.
This article shows that the existence of this interdependence weakens the whole approach. In particular, when the unemployment rate is considered a truly endogenous variable, the stability of the macroeconomic equilibrium is generally incompatible with the existence of unemployment ascribed to the fact that firms pay efficiency wages. Unable to display preview.
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Endogenous employment rate in the efficiency wage shirking approach. This process is experimental and the keywords may be updated as the learning algorithm improves. Palley has a different view of the fair wage-effort hypothesis. There are two differences between his fair wage-effort model and Akerloff and Yellen's model.
One is that Palley focuses on wage-profit, which indicates worker-firm concerns, while Akerloff and Yellen emphasize on wage-wage, which reflects comparisons between workers. If they psychologically think they does not receive fair wage, they will proportionally reduce their effort.
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However, this may be the case that feeling involvement in work enhances their happiness, workers will not reduce their effort proportionally even when they think they are not paid fairly. It's difficult to decide which is overweight. Palley thought treating labor as commodity misrepresent the nature of the labor exchange because people could intentionally react to the exchange, unlike the apathetic commodity. From Wikibooks, open books for an open world. An efficiency wage, also commonly referred to as a fair wage, is a theory in behavioral economics suggesting that a wage which exceeds the market clearing wage for a given occupation will illicit greater effort and productivity, ensuring that workers avoid shirking.
Generally, there are five sub-types of efficiency wage model. Retrieved 4 November February 22, Category : Book:Bestiary of Behavioral Economics. Namespaces Book Discussion.
What is efficiency wage theory?
Wage Differentials and Efficiency Wage Models : Evidence from the Chilean Economy
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