A Shred of Evidence on Theories of Wage Stickiness
Alan S. Blinder
Don H. Choi
A small interview survey was undertaken to see how actual wage-setters
would react to the central. ideas of several economic theories of wage
stickiness. Wage cuts were surprisingly prevalent in recent years, despite
the booming economy. The strongest finding was that managers believe that
perceptions of fairness playa major motivational role in labor markets; and
that a "fair" wage policy is a good deal more complicated than simply not
cutting wages. We also found substantial evidence for money illusion and
against the adverse-selection version of the efficiency wage model.
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