Is perfection optimal? Employment and product market competition

Arbeitspapier

This paper proposes a model of efficiency wage with endogenous workers flows in interaction with imperfect competition on the product markets. Subject to economy-wide shocks, firms hire and fire workers thus generating a certain turnover. We show that the intensity of this turnover negatively affects workers' incentives and induces higher efficiency wage premia. Increased competition pushes real wages up but effort incentive requirements prevent large wage adjustments. Hence, adjustments are made with quantities: both the separation and hiring rates increase with competition, increasing the wage premium and contributing to lower employment. As a consequence, an employmentmaximising level of competition may exist.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WZB Discussion Paper ; No. FS I 00-304

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Labor Contracts ; Labor Turnover; Vacancies; Layoffs ; Oligopoly and Other Imperfect Markets
• Subject: unemployment ; efficiency wage ; imperfect competition ; Theorie der Arbeitslosigkeit ; Effizienzlohn ; Unvollkommener Wettbewerb ; Schock ; Wettbewerb ; Beschäftigungseffekt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Amable, Bruno ; Gatti, Donatella
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (where): Berlin
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/44114
• Last update: 10.03.2025, 11:44 AM CET