"The Task of Contemporary Wage Theory
." In New Concept in Wage Determination.
"A Direct Test of Efficiency Wage Theory
: Evidence from the U.S.
An empirical test of efficiency wage theory
. Journal of Economic Behavior and Organization 28:107-29.
Lapides's approach involves a careful chronological examination of the evolution of wage theory
from its emergence in the earliest days of political economy to the 1860s.
Efficiency wage theory
holds that a higher wage also results in greater worker efficiency in a modern, developed economy, but for different reasons.
Krueger and Summers suggest that their results provide support for the efficiency wage theory
by indicating a link between wage premiums and increased work effort.
The great strength of the efficiency wage theory
is that it provides one conceivable explanation for why, even under perfectly flexible wages, people may be unemployed even though they would prefer to do the jobs of the current job-holders at less than the prevailing wage.(27) Beyond that, however, it is not clear that the theory can shed much light on why EC unemployment has risen over the past two decades.
The fact that workers respond more quickly to a change in their own wage than to a change in aggregate wages or prices has important implications for efficiency wage theory
. While most previous economists have considered efficiency wage theory
to be a theory of real wage rigidity, a model was developed in Section IV demonstrating that if workers respond more quickly to changes in their own wage in deciding whether to quit, then nominal wages can be rigid in an efficiency wage model.
The efficiency wage theory
meant that there could exist unemployment in equilibrium.
(11) Reviews of efficiency wage theory
generally do not cite Hicks's efficiency wage models (see, for example, Rotheim 1998 and Mankiw and Romer 1994).
To the extent that flextime is desired by workers, the compensating wage theory
alone would predict a negative association between flextime and wages, controlling for a vector of other job attributes.
What the neoinstitutionalists failed to understand or acknowledge about paradigm changes was stated by Paul Samuelson in a 1951 paper on wage theory
: "In economics it takes a theory to kill a theory; facts can only dent the theorist's hide" (Samuelson 1951a:323).