DP133 Efficiency Wages Versus Insiders and Outsiders

Author(s): Assar Lindbeck, Dennis J. Snower
Publication Date: October 1986
Keyword(s): Efficiency Wages, Insiders, Outsiders, Underbidding, Unemployment
JEL(s): 023, 026, 131, 821
Programme Areas: International Macroeconomics, Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=133

This paper compares two theories of involuntary unemployment: the efficiency-wage theory and the insider-outsider theory. We indicate that one of the central problems in providing microfoundations for the existence of involuntary unemployment is to explain why there is no underbidding, and we compare the two theories in this contex.