Carrots and Sticks: Pay, Supervision, and Turnover

Jonathan Leonard ()

Journal of Labor Economics, 1987, vol. 5, issue 4, S136-52

Abstract: The efficiency wage model (EWM) has been advanced as an explanation for large and persistent wage differentials. The shirking version of the EWM assumes a trade-off b etween self-supervision and external supervision. The turnover versio n assumes turnover is costly to the firm. Variation across firms in t he cost of monitoring/shirking or turnover then is hypothesized to ac count for wage variations across firms for homogeneous workers. Using a new sample of firm data, this paper presents empirical evidence of the trade-off of wage premiums for supervisory intensity and turnove r. Little evidence is found to support either version of the EWM. Copyright 1987 by University of Chicago Press.

Date: 1987
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