A Siocio-Psychological Theory of Efficiency Wage Growth

Faria, Joao and Jellal, Mohamed (2009): A Siocio-Psychological Theory of Efficiency Wage Growth.

Abstract

This paper provides a socio-psychological theory of efficiency wage growth. The model blends agency theory with the Forced Savings hypothesis by assuming that firms set an increasing wage profile to minimize shirking costs, and that workers’ effort is positively related to the variation of wages. In its simple formulation the model derives some interesting results, such as: i) a positive relationship between the growth rate of efficiency wages and the discount rate; ii) for the case of constant returns of motivation, the growth rate of wages is unrelated with technology and workers’ preferences. The model also allows the analysis of the optimal path of employment. The positive impact of increasing efficiency wage profile on job creation depends only on workers’ returns of motivation and technology.

• Item Type: MPRA Paper
• Language: English
• Keywords: Dynamic Efficiency Wage Profile, Job Satisfaction,Jobs Creation
• Subjects: J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Labor Contracts; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J28 - Safety ; Job Satisfaction ; Related Public Policy; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand

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