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A THEORY OF DOWNWARD‐RIGID WAGES AND CYCLICAL UNEMPLOYMENT
Author(s) -
ANNABLE JAMES E.
Publication year - 1977
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1977.tb00479.x
Subject(s) - economics , unemployment , nonmarket forces , wage , labour economics , efficiency wage , underemployment , involuntary unemployment , productivity , rigidity (electromagnetism) , independence (probability theory) , equity (law) , microeconomics , macroeconomics , factor market , statistics , mathematics , structural engineering , political science , law , engineering
The theory presented below provides a rationale for downward wage rigidity and consequent cyclical unemployment by modifying the neoclassical assumption of behavioral independence. Such a modification permits an examination of important nonmarket relationships holding between the individual's wage and the wages paid to other people and between perceived equity in wages received and worker productivity—both linkages widely recognized by personnel managers but little explored by economists. The resulting model predicts a pattern of behavior that is consistent with the available evidence on the actual operation of labor markets.