An Efficiency-Wage Model with Habit Concerns about Wages

Arbeitspapier

We analyse the implications of habit formation relating to wages in a multi-period efficiency-wage model. If employees have such preferences, their existence provides firms with incentives to raise wages and reduce employment over time. Greater intensity does not necessarily have the same consequences, because wage adjustments counteract the initial level impact. The firm’s response additionally depends on the wage-dependency of dismissal costs since such costs make an increasing wage profile more attractive and mitigate the effects of greater intensity of habit formation. We further show that short-lived productivity shocks have long-lasting wage and employment consequences. Moreover, habit concerns by firm owners reduce wages.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 8428

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Micro-Based Behavioral Economics: General‡ ; Wage Level and Structure; Wage Differentials ; Labor Contracts
• Thema: efficiency wages ; habit formation ; wage profile ; wage rigidity

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Goerke, Laszlo
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and Ifo Institute (CESifo)
• (wo): Munich
• (wann): 2020

Weitere Informationen

• Handle: http://hdl.handle.net/10419/223500
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ