Effort Elicitation, Wage Differentials and Income Distribution in a Wage-led Growth Regime

Jaylson Silveira () and Gilberto Lima

No 2014_10, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: Motivated by a considerable (experimental and empirical) evidence on endogenous labor effort and inter- and intra-industry wage differentials, this paper explores implications for income distribution, capacity utilization and economic growth of firms using different strategies to elicit effort (and hence productivity) from workers. The frequency distribution of effort-elicitation strategies in the population of firms is governed by a replicator dynamics that generates wage differential as a long-run, evolutionary equilibrium outcome. Although firms willing to elicit more labor effort have to compensate workers with a higher wage rate, a larger proportion of firms adopting such strategy will not necessarily produce a higher wage share in income and thereby higher rates of capacity utilization and economic growth. The intuition is that, depending on the accompanying rise in average labor productivity, the wage share in income (and hence the aggregate effective demand) may not vary positively with the proportion of firms paying higher wages. Therefore, endogenous labor productivity and wage differentials carry relevant theoretical and policy implications for a wage-led growth regime.

Keywords: Labor effort; wage differentials; income distribution; capacity utilization; economic growth. (search for similar items in EconPapers)
JEL-codes: J31 O11 O41 (search for similar items in EconPapers)
Date: 2014-07-21, Revised 2015-05-01
New Economics Papers: this item is included in nep-gro, nep-hme, nep-lab and nep-lma
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http://onlinelibrary.wiley.com/doi/10.1111/meca.12090/abstract (application/pdf)

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Journal Article: Effort Elicitation, Wage Differentials and Income Distribution in A Wage-Led Growth Regime (2016)
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