Relative Wages, Efficiency Wages, and Keynesian Unemployment

16 Pages Posted: 21 Dec 2000 Last revised: 30 Jan 2022

See all articles by Lawrence H. Summers

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: May 1988

Abstract

While modern economic theorists have produced a variety of explanations for the failure of wages to fall in the face of unemployment, Keynes emphasis on relative wages has not been reflected in most contemporary discussions. This short paper suggests that relative wage theories in which workers' productivity depends primarily on their relative wage provide the best available apparatus for understanding actual unemployment and its fluctuations. Such theories are very closely related to the efficiency wage theories that have received widespread attention in recent years.

Suggested Citation

Summers, Lawrence H., Relative Wages, Efficiency Wages, and Keynesian Unemployment (May 1988). NBER Working Paper No. w2590, Available at SSRN: https://ssrn.com/abstract=253994

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