Macroeconomic implications of labour market frictions and efficiency wages
Macroeconomic implications of labour market frictions and efficiency wages
The central issue of this thesis is the macroeconomic implications of adding frictions to an otherwise competitive labour market at the microeconomic level. The three papers, presented in Chapters 2, 3 and 4, study phenomena that relate to the relationship between a worker and a firm. Chapter 2 addresses issues that arise when firms face short term adjustment costs to changing employment levels, described as costs to changing employment quickly and modelled as fixed costs to changing employment decisions after all information in a period has been observed.
Chapter 3 is concerned with real hiring and firing costs, i.e. costs that are not transfers and to not contain any element of specific investment, incurred when a firm establishes a long term employment relationship. Although the chapters analyse different labour turnover costs, the main theoretical issue is the same: in the presence of turnover costs, there is an excess return to an existing relationship relative to a new one, and if the worker has got bargaining power and is able to obtain a part of this return, the firm may invest inefficiently. Both chapters analyse the implications of contractual arrangements that ensure efficient employment and investment decisions by preventing this problem - the hold up problem - from arising.
Chapter 4 relates directly to these two chapters by analysing and estimating a shirking model of efficiency wages with additional vacancy creation and matching frictions in the labour market. It provides an empirical analysis of a model where 'excessive wages' can cause unemployment. Using an efficiency wage model, the chapter decomposes unemployment into a shirking component, a matching friction component and a residual which is ascribed to wages being above the minimum incentive compatible.
University of Southampton
Larsen, Jens Ditlev Jolver
62b2f10d-4309-47da-ac97-516bc639eed2
1999
Larsen, Jens Ditlev Jolver
62b2f10d-4309-47da-ac97-516bc639eed2
Larsen, Jens Ditlev Jolver
(1999)
Macroeconomic implications of labour market frictions and efficiency wages.
University of Southampton, Doctoral Thesis.
Record type:
Thesis
(Doctoral)
Abstract
The central issue of this thesis is the macroeconomic implications of adding frictions to an otherwise competitive labour market at the microeconomic level. The three papers, presented in Chapters 2, 3 and 4, study phenomena that relate to the relationship between a worker and a firm. Chapter 2 addresses issues that arise when firms face short term adjustment costs to changing employment levels, described as costs to changing employment quickly and modelled as fixed costs to changing employment decisions after all information in a period has been observed.
Chapter 3 is concerned with real hiring and firing costs, i.e. costs that are not transfers and to not contain any element of specific investment, incurred when a firm establishes a long term employment relationship. Although the chapters analyse different labour turnover costs, the main theoretical issue is the same: in the presence of turnover costs, there is an excess return to an existing relationship relative to a new one, and if the worker has got bargaining power and is able to obtain a part of this return, the firm may invest inefficiently. Both chapters analyse the implications of contractual arrangements that ensure efficient employment and investment decisions by preventing this problem - the hold up problem - from arising.
Chapter 4 relates directly to these two chapters by analysing and estimating a shirking model of efficiency wages with additional vacancy creation and matching frictions in the labour market. It provides an empirical analysis of a model where 'excessive wages' can cause unemployment. Using an efficiency wage model, the chapter decomposes unemployment into a shirking component, a matching friction component and a residual which is ascribed to wages being above the minimum incentive compatible.
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Published date: 1999
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Local EPrints ID: 463634
URI: http://eprints.soton.ac.uk/id/eprint/463634
PURE UUID: fb732715-c02f-4ea8-8765-4b210d5b4ad2
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Date deposited: 04 Jul 2022 20:54
Last modified: 23 Jul 2022 02:15
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Author:
Jens Ditlev Jolver Larsen
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