Growth and unemployment in a shirking efficiency wage model

Michelle Alexopoulos ()

Canadian Journal of Economics, 2003, vol. 36, issue 3, pages 728-746

Abstract: The relationship between growth and unemployment in a general equilibrium shirking efficiency wage model is explored. In contrast to past work on this subject, detected shirkers are not dismissed but instead incur a monetary punishment. As a result of this modification, the model can account for a stable rate of unemployment when there is positive population growth and-or technological growth in the economy. Moreover, I show that institutions and policies that limit the ability of firms to punish detected shirkers or restrict their use of discretionary bonuses can increase unemployment and reduce the economy's long run growth rate.

JEL-codes: E0 J41 (search for similar items in EconPapers)
Date: 2003
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