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Efficiency Wages and the Wage Structure

Alan Krueger and Lawrence Summers

No 1952, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines differences in pay for equally skilled workers in different industries. The major finding is that there is substantial dispersion in wages across industries, even after allowing for measured and unmeasured labor quality, working conditions, fringe benefits, transitory demand shocks, threat of unionization, union bargaining power, firm size and other factors. Some direct evidence in favor of efficiency wage theories is presented. The evidence suggests that industry wage differentials are successful in eliciting better performance through reduced turnover and increased effort.

Date: 1986-06
Note: LS EFG
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Published as Krueger and Summers, "Efficiency Wages and the Inter-Industry Wage Structure," from Econometrica, Vol. 56, No. 2, March 1988, pp. 259-293.

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