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Article: Wage change and the quit behavior of workers: implications for efficiency wage theory.
- Article from:
- Southern Economic Journal
- Article date:
- July 1, 1994
- Author:
CopyrightCOPYRIGHT 1994 Southern Economic Association. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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I. Introduction
Over the past decade, economists have developed efficiency wage models to explain the presence of wage rigidity and thus of involuntary unemployment. In these models, workers' productivity depends positively on the wage or firms' costs depend negatively on the wage, giving firms an incentive to pay wages above the market-clearing level. One type of efficiency wage model is the turnover cost model of Stiglitz [26], Schlicht [24], and Salop [23], in which fewer workers quit at a firm paying high wages. Since hiring and training new workers is costly, firms pay high wages to reduce the number of workers who quit. In the turnover cost model, quits depend ...