Book contents
- Frontmatter
- Contents
- Acknowledgments for Reprinted Articles
- Introduction
- The Theory of Underemployment in Densely Populated Backward Areas
- Another Possible Source of Wage Stickiness
- Equilibrium Unemployment as a Worker Discipline Device
- Involuntary Unemployment as a Principal-Agent Equilibrium
- Labor Contracts as Partial Gift Exchange
- A Model of the Natural Rate of Unemployment
- Job Queues and Layoffs in Labor Markets with Flexible Wages
- Hierarchy, Ability, and Income Distribution
- Incentives, Productivity, and Labor Contracts
- Work Incentives, Hierarchy, and Internal Labor Markets
Another Possible Source of Wage Stickiness
Published online by Cambridge University Press: 10 January 2011
- Frontmatter
- Contents
- Acknowledgments for Reprinted Articles
- Introduction
- The Theory of Underemployment in Densely Populated Backward Areas
- Another Possible Source of Wage Stickiness
- Equilibrium Unemployment as a Worker Discipline Device
- Involuntary Unemployment as a Principal-Agent Equilibrium
- Labor Contracts as Partial Gift Exchange
- A Model of the Natural Rate of Unemployment
- Job Queues and Layoffs in Labor Markets with Flexible Wages
- Hierarchy, Ability, and Income Distribution
- Incentives, Productivity, and Labor Contracts
- Work Incentives, Hierarchy, and Internal Labor Markets
Summary
A number of hypotheses have been advanced to explain wage stickiness. This article explores another reason why wage stickiness might be in an employer's interest; the relationship between productivity and the wage rate. If the wage enters the short-run production function, a cost-minimizing firm will leave its wage offer unchanged, no matter how its output varies, if and only if the wage enters the production function in a labor-augmenting way.
One could argue—and I would argue—that the most interesting and important line of work in current macro theory is the attempt to reconstruct plausible microeconomic underpinnings for a recognizably Keynesian macroeconomics. The best developed approach to this task, which has just achieved at least a local maximum in Malinvaud (1977), starts from the presumption that the nominal wage, or some other equally important price, is sticky. I say “sticky” rather than “rigid” because the wage is allowed to move; the presumption is only that it does not move quickly enough to clear the labor market in a reasonable time.
A theory that rests on sticky wages owes itself an explanation of wage stickiness. Why does the wage not move flexibly to clear the labor market? The literature has produced several answers to that question, generally not mutually exclusive.
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- Efficiency Wage Models of the Labor Market , pp. 41 - 44Publisher: Cambridge University PressPrint publication year: 1986
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