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Slowing Down

Yu-Fu Chen and Gylfi Zoega

No 2012-40, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: We extend the efficiency wage model of Shapiro and Stiglitz to account for the observation that workers’ effort has a tendency to fall when they approach the end of their employment contract. In particular, we find that the efficiency wage increases when the end of term approaches for a given rate of unemployment. We draw implications for the behavior of workers who are approaching retirement, temporary employment contracts, and the advance notice of impending job loss.

Keywords: wage setting; shirking; finite horizons (search for similar items in EconPapers)
Date: 2012-04
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