Campbell, Carl (2011): Efficiency wage setting, labor demand, and Phillips curve microfoundations.
Download (1MB) | Preview
This study demonstrates that a model with efficiency wages and imperfect information produces a Phillips curve relationship. Equations are derived for labor demand and the efficiency wage-setting condition, and shifts in these curves in response to aggregate demand shocks result in a relationship with the characteristics of a Phillips curve. The Phillips curve differs from the efficiency wage-setting condition in that the Phillips curve is a more parsimonious expression and has a coefficient on expected inflation equal to 1. Also derived from this model is the counterpart curve to the Phillips curve in unemployment – inflation space.
|Item Type:||MPRA Paper|
|Original Title:||Efficiency wage setting, labor demand, and Phillips curve microfoundations|
|Keywords:||Phillips curve; Efficiency wages; Imperfect information|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation
|Depositing User:||Carl M. Campbell|
|Date Deposited:||14 Oct 2011 22:33|
|Last Modified:||08 Oct 2015 08:58|
Akerlof, George A., “Labor Contracts as Partial Gift Exchange,” Quarterly Journal of Economics, November 1982, 97, 543-69.
Akerlof, George A., “Gift Exchange and Efficiency Wage Theory: Four Views,” American Economic Review, May 1984, 74, 79-83.
Akerlof, George A. and Yellen, Janet L., “The Fair Wage-Effort Hypothesis and Unemployment,” Quarterly Journal of Economics, May 1990, 105, 255-83.
Ball, Laurence, “Credible Disinflation with Staggered Price-Setting,” American Economic Review, March 1994, 84, 282-289.
Bewley, Truman F., Why Wages Don’t Fall During a Recession, Cambridge, MA: Harvard University Press, 1999.
Calvo, Guillermo A., “Staggered Contracts in a Utility-Maximizing Framework,” Journal of Monetary Economics, September 1983, 12, 383-398.
Campbell, Carl M., “A Model of the Determinants of Effort,” Economic Modelling, March 2006, 23, 215-37.
Campbell, Carl M., “An Efficiency Wage Approach to Reconciling the Wage Curve and the Phillips Curve,” Labour Economics, December 2008, 15, 1388-1415.
Campbell, Carl M., (2009a) “An Efficiency Wage – Imperfect Information Model of the Aggregate Supply Curve,” Working Paper, MPRA Paper 15296, May 2009.
Campbell, Carl M., (2009b) “An Efficiency Wage – Imperfect Information Model of the Phillips Curve,” Working Paper, Northern Illinois University, May 2009.
Campbell, Carl M., “The Formation of Wage Expectations in the Effort and Quit Decisions of Workers,” Working Paper, Northern Illinois University, June 2011.
Campbell, Carl M., and Kunal S. Kamlani, “The Reasons for Wage Rigidity: Evidence from a Survey of Firms,” Quarterly Journal of Economics, August 1997, 112, 759-789.
Dixit, Avinash K. and Joseph E. Stiglitz, “Monopolistic Competition and Optimum Product Diversity,” American Economic Review, June 1977, 67, 297-308.
Friedman, Milton, “The Role of Monetary Policy,” American Economic Review, March 1968, 58, 1-17.
Fuhrer, Jeffrey C., “The Phillips Curve is Alive and Well,” New England Economic Review, March/April 1995, 41-56.
Fuhrer, Jeffrey C., “The (Un)Importance of Forward-Looking Behavior in Price Specifications,” Journal of Money, Credit, and Banking, August 1997, 29, 338-350.
Fuhrer, Jeff, and George Moore, “Inflation Persistence,” Quarterly Journal of Economics, February 1995, 110, 127-159.
Galí, Jordi, and Mark Gertler, “Inflation Dynamics: A Structural Econometric Analysis,” Journal of Monetary Economics, October 1999, 44, 195-222.
King, Robert G., and Mark W. Watson, “The Post-War U.S. Phillips Curve: A Revisionist Econometric History,” Carnegie-Rochester Conference Series on Public Policy, 1994, 41, 157-219.
Kobe, Katherine, “The Small Business Share of GDP, 1998-2004,” Small Business Research Summary, published by the SBA Office of Advocacy, April 2007.
Mankiw, N. Gregory, “The Inexorable and Mysterious Tradeoff between Inflation and Unemployment,” The Economic Journal, May 2001, 111, C45-C61.
Mankiw, N. Gregory and Reis, Ricardo, “Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve,” Quarterly Journal of Economics, November 2002, 117, 1295-1328.
McCallum, Bennett, “Comment,” in NBER Macroeconomics Annual: 1997, Cambridge, MA: MIT Press, 1997.
Phelps, Edmund S., “Money-Wage Dynamics and Labor-Market Equilibrium,” Journal of Political Economy, July-August 1968, 76, 678-711.
Phillips, A.W., “The Relationship between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957,” Economica, November 1958, 25, 283-99.
Roberts, John M., “New Keynesian Economics and the Phillips Curve,” Journal of Money, Credit, and Banking, November 1995, 27, 975-984.
Roberts, John M., “Inflation Expectations and the Transmission of Monetary Policy,” mimeo, Federal Reserve Board of Governors, March 1998.
Rotemberg, Julio J., “Sticky Prices in the United States,” Journal of Political Economy, November 1982, 60, 1187-1211.
Rudd, Jeremy and Karl Whelan, “New Tests of the new-Keynesian Phillips Curve,” Journal of Monetary Economics, September 2005, 52, 1167-1181.
Salop, Steven C., “A Model of the Natural Rate of Unemployment,” American Economic Review, March 1979, 69, 117-25.
Schlicht, Ekkehart, “Labor Turnover, Wage Structure and Natural Unemployment,” Zeitschrift für die Gesamte Staatswissewnschaft, June 1978, 134, 337-46.
Shapiro, Carl and Stiglitz, Joseph E., “Equilibrium Unemployment as a Worker Discipline Device,” American Economic Review, June 1984, 74, 433-44.
Samuelson, Paul A. and Solow, Robert M., “Analytical Aspects of Anti-Inflation Policy,” American Economic Review, May 1960, 50(2), 177-194.
Solow, Robert M., “Another Possible Source of Wage Stickiness,” Journal of Macroeconomics, Winter 1979, 1, 79-82.
Stiglitz, Joseph E., “Alternative Theories of Wage Determination and Unemployment in L.D.C.’s: The Labor Turnover Model,” Quarterly Journal of Economics, May 1974, 88, 194-227.
Taylor, John B., “Staggered Contracts in a Macro Model,” American Economic Review, May 1979, 69, 108-113.
Taylor, John B., “Output and Price Stability: An International Comparison,” Journal of Economic Dynamics and Control, February 1980, 2, 109-132.
Wadhwani, Sushil B., and Wall, Martin, “A Direct Test of the Efficiency Wage Model Using UK Micro-Data,” Oxford Economic Papers, October 1991, 43, 529-548.
Weiss, Andrew, “Job Queues and Layoffs in Labor Markets with Flexible Wages,” Journal of Political Economy, June 1980, 88, 526-38.
Weisskopf, Thomas E., “The Effect of Unemployment on Labour Productivity: An International Comparative Analysis,” International Review of Applied Economics, June 1987, 1, 127-51.
Available Versions of this Item
Efficiency wage setting, labor demand, and Phillips curve microfoundations. (deposited 14 Oct 2011 22:33)
- Efficiency wage setting, labor demand, and Phillips curve microfoundations. (deposited 06 Nov 2016 07:28)
- Efficiency wage setting, labor demand, and Phillips curve microfoundations. (deposited 21 Aug 2013 11:50)