Efficiency Wages and Policy Relevant Macroeconomics

2010 ◽  
Author(s):  
James Annable
Keyword(s):  
Efficiency Wages

scholarly journals The Relationship between Output and Unemployment with Efficiency Wages

2007 ◽  
Vol 8 (4) ◽  
pp. 561-577 ◽  
Author(s):  
Jim Malley ◽  
Hassan Molana
Keyword(s):  
Adverse Effects ◽  
Labour Market ◽  
Negative Relationship ◽  
Efficiency Wages ◽  
Market Imperfections ◽  
Supply Side ◽  
Demand Shock ◽  
The Relationship ◽  
German Data ◽  
Stabilisation Policies

Abstract We construct a stylised model of the supply side with goods and labour market imperfections to show that an economy can rationally operate at a low-effort state in which the relationship between output and unemployment is positive. We examine data from the G7 countries over 1960-2001 and find that only German data strongly favour a persistent negative relationship between the level of output and rate of unemployment. The consequence of this is that circumstances exist in which market imperfections could pose serious obstacles to the smooth working of expansionary and/or stabilisation policies and a positive demand shock might have adverse effects on employment.

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