The Macroeconomic Consequences of Reciprocity in Labor Relations

25 Pages Posted: 29 Feb 2008

See all articles by Jean-Pierre Danthine

Jean-Pierre Danthine

University of Lausanne - Institute of Banking and Finance (IBF); Centre for Economic Policy Research (CEPR); Swiss Finance Institute

André Kurmann

affiliation not provided to SSRN

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Abstract

We develop and analyze a structural model of efficiency wages founded on reciprocity. Workers are assumed to face an explicit trade-off between the disutility of providing effort and the psychological benefit of reciprocating the gift of a wage offer above some reference level. The model provides a rationale for rent sharinga feature that is very much present in the data but absent from previous formulations of the efficiency wage hypothesis. This firm-internal perspective on efficiency wages has potentially important macroeconomic consequences: rent-sharing considerations promote wage rigidity, internal amplification and differential responses to technology and demand shocks.

Suggested Citation

Danthine, Jean-Pierre and Kurmann, André, The Macroeconomic Consequences of Reciprocity in Labor Relations. Scandinavian Journal of Economics, Vol. 109, Issue 4, pp. 857-881, March 2008, Available at SSRN: https://ssrn.com/abstract=1098466 or http://dx.doi.org/10.1111/j.1467-9442.2007.00518.x

Jean-Pierre Danthine (Contact Author)

University of Lausanne - Institute of Banking and Finance (IBF) ( email )

Lausanne, 1015
Switzerland
+41 21 692 3485 (Phone)
+41 21 692 3335 (Fax)

HOME PAGE: http://www.hec.unil.ch/jdanthine/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swiss Finance Institute ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

André Kurmann

affiliation not provided to SSRN

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