EFFICIENCY WAGES, INFLATION AND GROWTH

Harilaos Mertzanis ()
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Harilaos Mertzanis: Hellenic Capital Market Commission

Journal of Economic Development, 2009, vol. 34, issue 2, 131-151

Abstract: The efficiency wage hypothesis is introduced and a work effort function is specified in which labor productivity depends on the distribution of income between wages and profits and the general level of output. The function is then incorporated in a structuralist-Keynesian growth model in which investment decisions depend on income distribution, inflation and the level of output. A ¡®conflict theory of inflation¡¯ is then developed in which wage and price change depend on real income aspirations and the rate of employment. It is, then, shown that changes in income distribution exert a direct effect, via aggregate demand, and an indirect effect, via work effort, on output and inflation. The two separate effects may be complementary or contradictory. The direction and magnitude of the overall impact on inflation and growth depends on institutional factors, such as the specification of the effort function, the different savings propensities, the determinants of capital accumulation and the state of income distribution.

Keywords: Efficiency Wages; Conflict Inflation; Growth (search for similar items in EconPapers)
JEL-codes: E12 E24 E31 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:34:y:2009:i:2:p:131-151

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