Pure Neoclassical Exploitation and the Level of Wages

Coldwell Daniel

American Journal of Economics and Sociology, 1990, vol. 49, issue 1, 21-34

Abstract: Abstract. The neoclassical theory of labor exploitation is extended by identifying a pure exploitation which occurs when the wage rate is less than both labor's marginal factor cost (=marginal revenue product) and its average revenue product. Pure exploitation is attributable to a labor market phenomenon alone and is unambiguously unfair from a Pigouvian perspective. It is argued that, contrary to a common belief, pure exploitation does not imply low wages. For example, pure exploitation and high wages are to be expected at least transitorily in the case of the economically profitable innovative firm.

Date: 1990
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