English, Article, Journal or magazine article edition: Motivation and Markets W. Bentley MacLeod; James Malcomson

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Bookmark: http://trove.nla.gov.au/version/73779
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Motivation and Markets
Author
  • W. Bentley MacLeod
  • James Malcomson
Physical Description
  • preprint
Notes
  • In standard shirking models of efficiency wages, workers are motivated only by high wages. Yet 23% of young US workers report receiving some form of performance pay. This paper extends the efficiency wage framework using the theory of self-enforcing agreements to allow for performance pay in the form of bonuses. The result is a simple model of wage formation that helps explain a number of apparently unrelated phenomena in labor markets. First, in efficient markets performance pay is preferred to an efficiency wage when the cost of having a job vacant is low and qualified workers are in short supply. Second, more capital intensive industries offer higher pay than less capital intensive industries, as observed in studies of inter-industry wages differentials. Third, sustaining an efficient outcome requires a social convention similar to the notion of a fair wage, although the outcome itself is determined by fundamentals and not by exogenously imposed notions of what is fair. Finally, a two-sector version of the model makes some predictions about the relationships between turnover and wages and between wages, growth and unemployment.
  • Efficiency wages, merit pay, migration, motivation, wage differentials.
  • RePEc:boc:bocoec:339
Language
  • English
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