Labor Market Dynamics When Effort Depends on Wage Growth Comparisons

Empirical Economics, Vol. 25, Issue 3

Posted: 22 Aug 2001

See all articles by David de la Croix

David de la Croix

Catholic University of Louvain (UCL) - Institut de Recherches Economiques et Sociales (IRES); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Franz C. Palm

University of Maastricht - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Jean-Pierre Urbain

Maastricht University - Department of Economics

Abstract

We present an efficiency wage model in which workers' disutility of effort depends on the level and on the growth rate of their wage relative to an alternative wage. Using data for four countries (US, UK, FR, GY), the implications of the model are examined and are found to be in accordance with the information in the non-stationary data. The restrictions implied by the model dynamics are not rejected by the data and the structural parameters are found to be constant through time. One interesting result is that the workers' disutility of effort depends less on relative wages growth and more on relative wage levels in the US than in the three European countries analyzed.

Keywords: Efficiency wages, partial gift exchange, effort function, cointegration, GMM

JEL Classification: E24

Suggested Citation

de la Croix, David and Palm, Franz C. and Urbain, Jean-Pierre, Labor Market Dynamics When Effort Depends on Wage Growth Comparisons. Empirical Economics, Vol. 25, Issue 3, Available at SSRN: https://ssrn.com/abstract=239172

David De la Croix (Contact Author)

Catholic University of Louvain (UCL) - Institut de Recherches Economiques et Sociales (IRES) ( email )

3, Place Montesquieu
Louvain-la-Neuve, 1348
Belgium
+32 10 47 3945 (Fax)

HOME PAGE: http://www.de-la-croix.be

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

Franz C. Palm

University of Maastricht - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31-(0)43-3883833 (Phone)
+31-(0)43-3258535 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Jean-Pierre Urbain

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
412
PlumX Metrics