This study tests the efficiency wage hypothesIs by estimating wage and quit equations with data from the Employment Opportunity Pilot Project survey of firms. An efficiency wage model is derived that predicts effects of turnover costs and unemployment on wages as functions of first and second derivatives from the quit equation. The model is tested by examining the relationships between the coef...

We exploit a natural experiment provided by the 1999 introduction of the UK National Minimum Wage (NMW) to test for efficiency wage considerations in a low-wage sector, the UK residential care homes industry. Empirical results provide support to the wagesupervision trade-off prediction of the shirking model and suggest that the NMW may have operated as an efficiency wage. Our findings are in li...

Wage Effects of On-the-Job Training: A Meta-Analysis A meta-analysis is used to study the average wage effects of on-the-job training. This study shows that the average reported wage effect of on-the-job training, corrected for publication bias, is 2.6 per cent per course. The analyses reveal a substantial heterogeneity between training courses, while wage effects reported in studies based on i...

One of the most puzzling facts in economics is the firm size-wage effect. After controlling for the observable characteristics of workers (age, gender, education, residence etc.), firms (industry, occupation, work conditions etc.) and negotiation effect (unionization), one still finds that the sheer size of a firm increases the wage, contrary to the one-good one-price doctrine. We provide a sim...

Do Emotions Improve Labor Market Outcomes? Traditionally, models of economic decision-making assume that individuals are rational and emotionless. This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: the scarcity of nominal wage cuts. Firms frequently cut real wages of workers, by i...

Wage rigidity – the observation that wages cannot be adjusted downwards – has important implications for labour markets and macroeconomic performance. Empirical evidence on the extent, causes and consequences of wage rigidity on the individual level is relatively scant, however. This Feature presents articles that apply a new methodology to estimate the incidence and extent of nominal and real ...

This paper replicates studies by Medoff and Abraham (1980, 1981) and Flabbi and Ichino (2001) using personnel data from the Dutch national aircraft manufacturer Fokker. It shows how a formal salary system, as is widely used by large firms, brings about that seniority-wage profiles are largely independent of controls for reported performance in crosssectional wage regressions even though supervi...

Equilibrium search models obtained endogenous wage differentials among identical firms and workers based on the equal profit assumption. We formulate a more fundamentally dynamic game with identical players where workers can strategically quit and firms cannot commit to future wages, and find that equilibrium wage differentials arise due to different worker expectations on the firms’ future beh...

On April 1, 1992, New Jersey's minimum wage rose from $4.25 to $5.05 per hour. To evaluate the impact of the law we surveyed 410 fast-food restaurants in New Jersey and eastern Pennsylvania before and after the rise. Comparisons of employment growth at stores in New Jersey and Pennsylvania (where the minimum wage was constant) provide simple estimates of the effect of the higher minimum wage. W...

We analyze the effect of the wage gap between regular and non-regular employment on a macroeconomy by using a Keynesian dynamic model. If the steady state equilibrium exhibits the stagnationist regime, the size of the reserve army effect affects the stability of the equilibrium. On the other hand, if the steady state equilibrium exhibits the exhilarationist regime, an increase in the wage gap d...