The Theory of Internal Wage and Employment Structure

Andrew Oswald

Bell Journal of Economics, 1981, vol. 12, issue 1, 263-271

Abstract: This article examines the behavior of a competitive firm in a world in which workers gradually acquire skill and experience. It is shown that the firm will not pay workers--who are indexed in this model by seniority--the value of their marginal product. The article also proposes a simple incentive argument as a possible explanation for the fact that many firms seem to pay wages based upon age and length of service.

Date: 1981
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