Empirical Tests of Efficiency Wage Models

Tzu-Ling Huang, Arne Hallam (), Peter Orazem and Elizabeth M. Paterno

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Two-digit manufacturing industry-level production functions are used to test efficiency wage propositions. Conclusive tests require functional forms which allow differences in elasticities of substitution between observable human capital, wage premia and other inputs. Results demonstrate that unexplained industry wage premia and higher unemployment rates raise productivity. Wage premia and the human capital wage component cannot be aggregated into a single human capital index. Nevertheless, 88% of the productivity effect associated with industry wages can be tied to observable human capital in the industry, with only 12% associated with the wage premium.

Date: 1998-02-01
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Citations: View citations in EconPapers (15)

Published in Economica, February 1998, vol. 65, pp. 125-143

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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:1325

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