Reciprocity and downward wage rigidity

نویسنده

  • Chung-Cheng Lin
چکیده

The employment relationship is to a large extent characterized by incomplete contracts, in which workers have a considerable degree of discretion over the choice of their work effort. This discretion at work kicks in the potential importance of ‘‘gift exchange” or reciprocity between workers and employers in their employment relationship. Built on the seminal work of Akerlof (1980), this paper adopts a social norm approach to model reciprocity in labor markets and theoretically derives two versions of downward wage rigidity. The first version explains why employers may adopt a high wage policy far above the competitive level. This version is not a novel finding in the existing literature and is mainly served as a benchmark for later comparison in the current paper. Our main contribution lies in the second version in which not only may employers adopt a high wage policy far above the competitive level, but one can also account for the asymmetric behavior of wages and explain why employers are hesitant about wage cuts in the presence of negative shocks. We argue that this second and stronger version of downward wage rigidity has moved the efficiency wage theory a step forward. 2010 Elsevier Inc. All rights reserved.

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

A Study of Downward Nominal Wage Rigidity in Korea

This paper examines downward nominal wage rigidity in Korea using aggregate and individual-level data. We find that the degree of downward nominal wage rigidity differs depending on the data sources used. Results from the aggregate data indicate that, on average, wages have been flexible. By contrast, evidence from the micro data suggests that nominal wages are downwardly rigid most of the time...

متن کامل

Downward Nominal Wage Rigidity in the United States During and After the Great Recession

Rigidity in wages has long been thought to impede the functioning of labor markets. One recent strand of the research on wage flexibility in the United States and elsewhere has focused on the possibility of downward nominal wage rigidity and what implications such rigidity might have for the macroeconomy at low levels of inflation. The Great Recession of 2008-09, during which the unemployment r...

متن کامل

Downward wage rigidity in Europe: A new flexible parametric approach and empirical results

We suggest a new parametric approach to estimate the extent of downward nominal wage rigidity in ten European countries between 1994 and 2001. The data base used throughout is the User Data Base (UDB) of the European Community Household Panel (ECHP). The proposed approach is based on the very flexible generalized hyperbolic distribution which allows to model wage change distributions characteri...

متن کامل

Pay Cuts and Morale: a Test of Downward Nominal Rigidity

This paper tests the ‘morale’ theory of downward nominal wage rigidity. This theory relies on workers disliking nominal pay cuts: cuts should make workers less happy. We investigate this using panel data on individual employees’ pay and satisfaction. We con...rm that nominal cuts do make workers less happy than if their pay had not fallen. But we ...nd no di¤erence in the e¤ect on happiness of ...

متن کامل

Fairness, Reciprocity, and Wage Rigidity

Fairness, Reciprocity, and Wage Rigidity This paper contains a review of empirical work related to wage rigidity, where researchers have collected their own data. The work includes field studies, economic experiments, and psychological surveys. Economists have done the field studies and experiments, and management scientists and experimental psychologists have done the surveys. There is a remar...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 2010