Dynamic of Employment and Wages Incentives

Joao Faria and Mohamed Jellal ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies a dynamic model with efficiency wages and adjustment costs associated with hiring and firing decisions. With linear adjustment costs, the optimal efficiency wage and employment are affected by the real interest rate and adjustment costs. When lumpy costs or convex adjustment costs (symmetric or asymmetric) are taken into account, the interest rate and the adjustment costs do not play any role in determining the equilibrium efficiency wage and level of employment.

Keywords: Wage determination; Jobs creation (search for similar items in EconPapers)
JEL-codes: J23 J41 (search for similar items in EconPapers)
Date: 2009-09-08
New Economics Papers: this item is included in nep-bec, nep-dge and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17183

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