On involuntary unemployment: notes on efficiency-wage competition

Marco Guerrazzi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper introduces a model of efficiency-wage competition along the lines put forward by Hahn (1987). Specifically, I analyse a two-firm economy in which employers screen their workforce by means of increasing wage offers competing one another for high-quality employees. The main results are the following. First, using a specification of effort such that the problem of firms is concave, optimal wage offers are strategic complements. Second, a symmetric Nash equilibrium can be locally stable under the assumption that firms adjust their wage offers in the direction of increasing profits by conjecturing that any wage offer above (below) equilibrium will lead competitors to underbid (overbid) such an offer. Finally, the exploration of possible labour market equilibria reveals that effort is counter-cyclical.

Keywords: Efficiency-Wages; Wage Competition; Nash Equilibria; Effort (search for similar items in EconPapers)
JEL-codes: C72 E12 E24 J41 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cta, nep-hrm, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38140

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