The impact of sectoral shocks on an efficiency wage equilibrium

Jon R. Neill

The Quarterly Review of Economics and Finance, 2022, vol. 84, issue C, 589-595

Abstract: This paper analyzes a two-good economy wherein an efficiency wage is paid. Our objective is to determine how outputs, employment, and unemployment will change in response to both exogenous demand and supply shocks. Our principal conclusion is that demand shocks cannot explain decreases in production in both sectors of such an economy. The driver of this and our other conclusions is the role of relative prices in determining supply, and the labor market linkages between sectors.

Keywords: Efficiency wages; Demand shocks; Supply shocks; Unemployment (search for similar items in EconPapers)
JEL-codes: E2 E3 J2 J6 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:84:y:2022:i:c:p:589-595

DOI: 10.1016/j.qref.2020.10.015

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