Title

Efficiency Wages and Economic Growth

Publication Type

Journal Article

Publication Date

1993

Abstract

This paper examines the positive and normative implications of introducing efficiency wages into a standard growth model. A number of useful findings are obtained under the empirically justifiable assumption that the elasticity of substitution between capital and labor is less than unity. It is shown that an increase in thrift shifts downward the whole path of equilibrium unemployment to leave it permanently lower in the new steady state. A level increase in the measure of, as well as an increase in the rate of Harrod-neutral technical progress, are contractionary for equilibrium employment. The market economy underinvests.

Discipline

Economics

Research Areas

Applied Microeconomics

Publication

Economics Letters

Volume

42

Issue

2-3

First Page

201

Last Page

208

ISSN

0165-1765

Identifier

10.1016/0165-1765(93)90062-h

Publisher

Elsevier

Additional URL

http://dx.doi.org/10.1016/0165-1765(93)90062-h

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