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Efficiency Wages in Weitzman's Share Economy
Author(s) -
LEVINE DAVID
Publication year - 1989
Publication title -
industrial relations: a journal of economy and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.61
H-Index - 57
eISSN - 1468-232X
pISSN - 0019-8676
DOI - 10.1111/j.1468-232x.1989.tb00728.x
Subject(s) - economics , unemployment , subsidy , efficiency wage , labour economics , wage , productivity , marginal product , profit (economics) , revenue , marginal cost , profit sharing , microeconomics , macroeconomics , production (economics) , market economy , accounting , finance
Weitzman proposes widespread profit or revenue sharing as a way of guaranteeing both very low levels of equilibrium unemployment and increased stability in the face of aggregate shocks. The benefits of a share economy come from the subsidy that current workers pay to marginal workers. In an efficiency‐wage model, the wage subsidy paid by current workers costs the firm as much in lower productivity as it gains from lower labor costs. There is, therefore, neither a reduction of the equilibrium unemployment rate nor a necessary increase in macroeconomic stability when the share economy is introduced.