The Rational Worker Theory

40 Pages Posted: 17 Dec 2007

Date Written: December 2007

Abstract

Worker on-the-job behavior has been largely, and curiously, ignored in mainstream economic theory. This paper corrects that deficiency, constructing a workplace model motivated by utility- and profit-optimization and focused on price-mediated exchange. The analysis critically accommodates specialized technology as well as what practitioners know about worker preferences, relocating of a substantial share of rational labor pricing from the labor market to the establishment-specific workplace and identifying conditions consistent with nonmarket-wage persistence. Robust explanations are provided for the reluctance of many employers to cut wages, labor-pricing differences by establishment size, and chronic (variable) market disequilibrium. At its most ambitious, the rational-worker theory identifies general workplace equilibrium as an compelling alternative to general market equilibrium in providing microfoundations for macroeconomic analysis.

Keywords: wages, worker behavior, workplace equilibrium

JEL Classification: D01, D23, E10, E23, E24, J22, J30, M50

Suggested Citation

Annable, James, The Rational Worker Theory (December 2007). Available at SSRN: https://ssrn.com/abstract=1074423 or http://dx.doi.org/10.2139/ssrn.1074423

James Annable (Contact Author)

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