Are wages too low? Empirical implications of efficiency wage models.

Authors

Thomas J. Carter, University of South Florida St. PetersburgFollow

SelectedWorks Author Profiles:

Thomas J. Carter

Document Type

Article

Publication Date

1999

ISSN

0038-4038

Abstract

Firms may pay efficiency wages to enhance productivity. The conventional presumption is that efficiency wages are inefficiently high because they lead to unemployment that is also inefficiently high; government policies that lower wages raise output. Using a simple and general efficiency wage model, this paper finds a necessary and sufficient condition for the opposite conclusion. If the condition holds, wages are inefficiently low, leading to productivity that is also inefficiently low. It is the high-wage policies that raise output, even if they also lower employment. Published empirical results support the condition. No evidence is found for the conventional presumption.

Comments

Citation only. Full-text article is available through licensed access provided by the publisher. Members of the USF System may access the full-text of the article through the authenticated link provided.

Publisher

Wiley-Blackwell

Recommended Citation

Carter, T. J. (1999). Are wages too low? Empirical implications of efficiency wage models. Southern Economic Journal, 65(3), 594-602. doi:10.2307/1060818

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