Open AccessEfficiency-wage model
Author(s) -
Nikola Fabris
Publication year - 2013
Publication title -
sociologija
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.174
H-Index - 8
eISSN - 2406-0712
pISSN - 0038-0318
DOI - 10.2298/soc1303461f
Subject(s) - economics , interpretation (philosophy) , wage , labour economics , labour supply , general equilibrium theory , neoclassical economics , supply and demand , efficiency wage , keynesian economics , microeconomics , computer science , programming language
In classical theory, the labour market operates as any other market, that is, the supply and demand determines the equilibrium between wages and the number of employees. The Keynesians went a step further by pointing out that the labour market does not follow the same principle as other markets and that wages do not change due to numerous rigidities, i.e. that the equilibrium is not achieved with full employment. The neoclassical macroeconomics reverts to the classical theory, noting that the labour market equilibrium is achieved immediately. The weakness of these theories is that they do not sufficiently consider specific features of the labour market and/or human labour. However, the new Keynesians went a step further in this direction by developing the efficiency wage model incorporating both economic and sociological explanations in the labour market interpretation. Nevertheless, it seems that there is still enough room for further improvements of this model and the paper communicates certain suggestions to that end