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Short Run Analysis
- Wage is set above the market wage due to the added benefits of paying a higher wage.
- Increased productivity
- Less job turnover
- Lower recruiting costs
Higher Wage Higher Cost of Losing Job Lower Monitoring Cost Increase Employment.
- Determine efficiency wage based on no-shirking condition such that,
- Result: The no-shirking wage,
Efficiency Wage Model
Matthew W. Chesnes