Labor Contracts as Partial Gift Exchange

George Akerlof

The Quarterly Journal of Economics, 1982, vol. 97, issue 4, 543-569

Abstract: This paper explains involuntary unemployment in terms of the response of firms to workers' group behavior. Workers' effort depends upon the norms determining a fair day's work. In order to affect those norms, firms may pay more than the market-clearing wage. Industries that pay consistently more than the market-clearing wage are primary, and those that pay only the market-clearing wage are secondary. Thus, this paper also gives a theory for division of labor markets between primary and secondary.

Date: 1982
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