Labor market dynamics when effort depends on wage growth comparisons

David de la Croix, Franz Palm and Jean-Pierre Urbain

No 1996019, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We present an efficiency wage model in which workers' effort depends on the level and on the growth rate of their wage relative to an alternative wage. Using data for four countries (US, UK, FR, GY), the implications of the model are examined and are found to be in accordance with the information in the non-stationary data. The restrictions implied by the model dynamics are not rejected by the data. Moreover the structural parameters are found to be constant through time, indicating that, although very simple, the model is likely to be robust to the Lucas critique. One interesting result is that the workers' effort depends less on relative wages growth and more on relative wage levels in the US than in the three European countries analyzed.

Keywords: efficiency wages; effort function; cointegration; GMM (search for similar items in EconPapers)
JEL-codes: E24 (search for similar items in EconPapers)
Pages: 23
Date: 1996-04-01, Revised 1996-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Labor market dynamics when effort depends on wage growth comparisons (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1996019

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