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Efficiency Wage Theories: A Partial Evaluation
Abstract
This paper surveys recent developments in the literature on efficiency wage theories of unemployment. Efficiency wage models have in common the property that in equilibrium firms may find it profitable to pay wages in excess of market clearing. High wages can help reduce turnover, elicit worker effort, prevent worker collective action, and attract higher-quality employees. Simple versions of efficiency wage models can explain normal involuntary unemployment, segmented labor markets, and wage differentials across firms and industries for workers with similar productive characteristics. However, deferred payment schemes can solve some efficiency wage problems without requiring job rationing. A wide variety of evidence on interindustry wage differences is analyzed. Efficiency wage models appear useful in explaining the observed pattern of wage differentials. The models also provide several mechanisms for cyclical fluctuations in response to aggregate demand shocks.
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Citations
Cited by
Firms and Labor Market Inequality: Evidence and Some Theory
Card, D., Cardoso, A. R., Heining, J., & Kline, P. (2018) · Journal of Labor Economics · doi:10.1086/694153 · Cited by 919
Gneezy, U., & List, J. A. (2006) · Econometrica · doi:10.1111/j.1468-0262.2006.00707.x · Cited by 699
Labor Supply Preferences, Hours Constraints, and Hours-Wage Trade-offs
Altonji, J. G., & Paxson, C. H. (1988) · Journal of Labor Economics · doi:10.1086/298183 · Cited by 249
Metadata
- Authors
- Katz, L. F.
- Venue
- NBER Macroeconomics Annual
- Publisher
- University of Chicago Press
- Published
- 1986-01-01
- Volume
- 1
- Pages
- 235-235
- ISSN
- 0889-3365 (ISSN-L)
- OpenAlex
- W3124441914
- Cited by
- 446
- References
- 0
- FWCI
- 56.03
- Type
- journal article
- Language
- en
- Open access
- closed
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- CoChat. (2026). Citation check: Efficiency Wage Theories: A Partial Evaluation. https://app.cochat.ai/papers/10.2307/3585171
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- Katz, L. F. (1986). Efficiency Wage Theories: A Partial Evaluation. NBER Macroeconomics Annual. https://doi.org/10.2307/3585171
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
