Imperfect monitoring of worker on-the-job effort is incorporated into a real business cycle-style model. While the model is successful in generating highly countercyclical unemployment, as is observed in the data, it also generates strongly procyclical real wages whereas the data is characterized by, at best, weakly procyclical real wages. This is, perhaps, surprising in that ``efficiency wages'' are often cited as a source of ``sticky'' real wages. Finally, the model produces asymmetric business cycles: recessions are more severe than expansions.
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