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.