Saving good jobs from global competition by rewarding quality and efforts

Yongjin Wang and Laixun Zhao

Journal of International Economics, 2015, vol. 96, issue 2, 426-434

Abstract: This paper links firms' endogenous quality choices to worker effort and efficiency wages. In the model, firms differ in their ability to monitor workers who have an incentive to shirk. As high quality output requires high worker effort, it is firms with better monitoring ability that upgrade their quality. Indeed, these firms upgrade their quality to such a degree that they also end up paying higher wages to induce even more worker effort. Trade liberalization can induce greater or smaller wage inequality but always enlarges the welfare inequality as higher wages go hand in hand with even greater effort.

Keywords: Trade liberalization; Inequality; Efficiency wages; Unemployment (search for similar items in EconPapers)
JEL-codes: F16 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:96:y:2015:i:2:p:426-434

DOI: 10.1016/j.jinteco.2015.03.005

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