DP5174 The Macroeconomic Consequences of Reciprocity in Labour Relations
|Author(s):||Jean-Pierre Danthine, André Kurmann|
|Publication Date:||August 2005|
|Keyword(s):||efficiency wages, reciprocity, rent-sharing, wage rigidity|
|JEL(s):||E24, E32, J50|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=5174|
We develop and analyse a structural model of efficiency wages founded on reciprocity. Workers are assumed to face an explicit trade-off between the disutility of providing effort and the psychological benefit of reciprocating the gift of a wage offer above some reference level. The model provides a rationale for rent sharing -- a feature that is very much present in the data but absent from previous formulations of the efficiency wage hypothesis. This firm-internal perspective on efficiency wages has important macroeconomic consequences: rent-sharing considerations promote wage rigidity, internal amplification and asymmetric responses to technology and demand shocks.