Pareto Inefficiency of Market Economies: Search and Efficiency Wage Models

Bruce Greenwald and Joseph Stiglitz

No 2651, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper shows that market economies with search and in which wages are affected by efficiency wage considerations are not constrained Pareto efficient. Wages are not set at Pareto efficient levels, nor is the level of employment (unemployment) Pareto efficient. We identify the nature of the biases and the welfare improving government interventions.

Date: 1988-07
Note: EFG
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Citations: View citations in EconPapers (27)

Published as The American Economic Review, Vol. 78, No. 2, pp. 351-355, (May 1988).

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