Testing Dynamic Models of Worker Effort Machin, Stephen; Manning, Alan

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Machin, Stephen ; Manning, Alan
Appears In
Journal of Labor Economics
Employee motivation -- Testing; Collective bargaining -- Evaluation; h social sciences (general)
Academic; Trade
This article derives three dynamic models of worker effort determination, based on a shirking efficiency wage model, a compensating differentials model, and a union-firm bargaining model. It shows that all of these three models have the same long-run comparative statics but differ in their short-run dynamics. We use these different predictions about the dynamics as a basis for testing the models. Euler equations for each model are estimated using panel data on 486 U.K. companies. The evidence supports the shirking model in firms with low levels of unionization but the bargaining model in highly unionized industries.
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