Pareto Inefficiency of Market Economies: Search and Efficiency Wage Models

18 Pages Posted: 14 Apr 2007

See all articles by Bruce C. N. Greenwald

Bruce C. N. Greenwald

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: July 1988

Abstract

This paper shows that market economies with search and in which wages are affected by efficiency wage considerations are not constrained Pareto efficient. Wages are not set at Pareto efficient levels, nor is the level of employment (unemployment) Pareto efficient. We identify the nature of the biases and the welfare improving government interventions.

Suggested Citation

Greenwald, Bruce and Stiglitz, Joseph E., Pareto Inefficiency of Market Economies: Search and Efficiency Wage Models (July 1988). NBER Working Paper No. w2651. Available at SSRN: https://ssrn.com/abstract=979723

Bruce Greenwald (Contact Author)

Columbia Business School - Finance and Economics ( email )

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National Bureau of Economic Research (NBER)

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Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

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United States
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(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

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