Fairness as a source of hysteresis in employment and relative wages

Peter Skott

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper analyses the influence of norms of fairness on wage formation. Fairness is defined by `real-wage' and `relative-wage' norms that relate wage offers to workers' own current wage and to the wages of other groups of workers, and, to avoid shirking, firms pay fair wages. The wage norms change endogenously, and the result is hysteresis with respect to both employment and the distribution of wages. An extension of the model that allows `induced overeducation' may help explain trends in wage inequality.

Keywords: Wage norms; fairness; hysteresis; overeducation; wage inequality; unemployment (search for similar items in EconPapers)
JEL-codes: E12 E24 J31 J41 (search for similar items in EconPapers)
Pages: 36
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Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Fairness as a source of hysteresis in employment and relative wages (2005)
Working Paper: Fairness as a source of hysteresis in employment and relative wages (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2003-6

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