efficiency wage

Economists have several explanations for the intuition behind efficiency wages.

Their conclusion is that the Ford experience supports efficiency wage interpretations.

Efficiency wage theories explain why firms might pay their employees more than the market clearing rate.

These enhancements, known as efficiency wage effects, cut the cost of rent sharing.

In efficiency wage models, workers are paid at levels that maximize productivity instead of clearing the market.

The adverse selection model adds yet another flavour to our broad set of efficiency wage models.

The authors include other variables based on two other theories: efficiency wage and search theory.

Efficiency wage theories tie back with the rationale of the firm as a form of productive organization.

These results, by themselves inconsistent with the oligopoly-oligopsony hypothesis, may be due to the prevalence of other factors, such as efficiency wages.

Sociological theories: Efficiency wages may result from traditions.

Akerlof (1982) provided the first explicitly sociological model leading to the efficiency wage hypothesis.

Mr. Stiglitz did not invent efficiency wage theory, but he certainly elaborated on it.

Unlike implicit contrary theory and efficiency wages, this line of research does not rely on a higher than market-clearing wage level.

Efficiency wage models suggest that employers pay their workers above market clearing wages in order to enhance their productivity.

There may be full employment in the economy, and yet efficiency wages may prevail in some occupations.

However, efficiency wages do not necessarily imply unemployment, but only uncleared markets and job rationing in those markets.

Efficiency Wage Models of the Labor Market.

Efficiency wages offer therefore a market failure explanation of unemployment - in contrast to theories which emphasize government intervention (such as minimum wages).

There are several theories (or "microfoundations") of why managers pay efficiency wages (wages above the market clearing rate):

The manager thus may pay an efficiency wage in order to create or increase the cost of job loss, which gives a sting to the threat of firing.

In labor economics, the efficiency wage hypothesis argues that wages, at least in some markets, form in a way that is not market-clearing.

Behavioral economists highlight individual biases in decision making, and often involve problems and solutions concerning sticky wages and efficiency wages.

Modern mainstream economics points to cases where equilibrium does not correspond to market clearing (but instead to unemployment), as with the efficiency wage hypothesis in labor economics.

Economists have several theories explaining the possibility of involuntary unemployment including implicit contract theory, disequilibrium theory, staggered wage setting, and efficiency wages.

As part of this effort, he calculated the value of voluntary labor in the United States, which is a factor considered in the analysis of efficiency wage.