 The Choice of Technology and Equilibrium Wage RigidityFrontiers of Economics in China-Selected Publications from Chinese Universities, 2015, vol. 10, issue 2, 252-271 Abstract: In this general equilibrium model, firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Capital and labor are the two factors of production. The existence of efficiency wages leads to unemployment. The model is able to explain some interesting observations of the labor market. First, even though there is neither long-term labor contract nor costs of wage adjustment, wage rigidity is an equilibrium phenomenon¡ªan increase in the exogenous job separation rate,the size of the population, the cost of exerting effort, and the probability that shirking is detected will not change the equilibrium wage rate. Second, the equilibrium wage rate increases with the level of capital stock. Third, a higher level of capital stock does not necessarily reduce the unemployment rate. That is, there is no monotonic relationship between capital accumulation and the unemployment rate. Keywords: unemployment; efficiency wages; wage rigidity; choice of technology; oligopolistic competition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:10:y:2015:i:2:p:252-271 Access Statistics for this article Frontiers of Economics in China-Selected Publications from Chinese Universities is currently edited by LONG Jie More articles in Frontiers of Economics in China-Selected Publications from Chinese Universities from Higher Education Press |
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