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Growth and unemployment in a shirking efficiency wage model
Author(s) -
Alexopoulos Michelle
Publication year - 2003
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/1540-5982.t01-2-00010
Subject(s) - economics , unemployment , growth model , punishment (psychology) , efficiency wage , unemployment rate , wage , wage growth , labour economics , work (physics) , macroeconomics , mechanical engineering , psychology , social psychology , engineering
. The relationship between growth and unemployment in a general equilibrium shirking efficiency wage model is explored. In contrast to past work on this subject, detected shirkers are not dismissed but instead incur a monetary punishment. As a result of this modification, the model can account for a stable rate of unemployment when there is positive population growth and/or technological growth in the economy. Moreover, I show that institutions and policies that limit the ability of firms to punish detected shirkers or restrict their use of discretionary bonuses can increase unemployment and reduce the economy's long run growth rate. JEL Classification: E0, J41