Profitability, investment, and efficiency wages

Profitability, investment, and efficiency wages

We examine a model that blends the neoclassical theory of investment with an intertemporal efficiency wage model with turnover costs. Investment decisions in capital are associated with the allocation of labor and the determination of efficiency wages. The model relates Tobin’s q to efficiency wages and, in particular, to the Solow condition. It provides a general framework to analyze firm’s in...

Sticky Wages, Efficiency Wages, and Market Processes

ainstream macroeconomics is in disarray. Perusal of commonly used textbooks in macroeconomics will confirm that impression without much difficulty. Unfortunately, the same statement could have been made, and often was made, fifteen years ago. While in this sense little has changed in recent years, the disarray is now more fundamental and severe than a t any time since the 1930s. Amidst this dis...

Testing For Efficiency Wages In Iran

Investment Functions and the Profitability Gap

We examine a variety of fixed asset investment theory approaches and show that, despite apparent differences, all contain a common ‘gene’ – the profitability gap. This finding is equally applicable to the paradigms of neoclassical general equilibrium in logical time and post-classical fullyadjusted stationary and steady states in historical time. The generic investment function and its characte...

Workfare, Monitoring, and Efficiency Wages

The impact of a stronger work requirement for welfare recipients in a workfare program is studied in an efficiency wage model where a representative firm chooses its level of monitoring activities. A stricter workfare policy raises employment and monitoring activities. It typically increases profits and reduces the tax rate. The impact on the net wage is ambiguous. Utility levels of employed wo...