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    Wages ahead of demand

    Orszag, J.M. and Zoega, Gylfi (1996) Wages ahead of demand. Economics Letters 53 (3), pp. 341-347. ISSN 0165-1765.

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    The paper is an attempt to account for the empirical results of Krueger and Summers (Econometrica, 1988, 56, 259–293), which suggest significant inter-industry wage differentials. We derive a dynamic efficiency wage model where firms use their wage policy to reduce turnover costs. Industry wages are shown to be a positive function of both the level of productivity and its expected rate of growth. We use estimated Solow residuals as measures of industry productivity growth and relate them to inter-industry wage differentials. A positive relationship is found at the one-digit level but not for two-digit manufacturing industries.


    Item Type: Article
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Sarah Hall
    Date Deposited: 01 Dec 2020 17:14
    Last Modified: 02 Aug 2023 18:06


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