Abstract
Wage formation is often analyzed by assuming that wage differentials reflect productivity differentials intrinsic to the workers, like differences in skill or qualification. Observed industry and firm effects on wages suggests, however, that wage differentials may result from causes rather unrelated to intrinsic productivity. This paper considers the polar case of homogeneous labor. The wage differentials emerging here are, thus, unrelated to individual differences. The model used is of an economy with a segmented labor market in which the primary sector industries are characterized by high turnover costs. This induces firms to pay efficiency wages reflecting turnover costs. The turnover case offers some rather surprising yet straightforward conclusions regarding efficiency, discrimination and taxation: Workers capture job rents; wage dispersion is too high; considerable wage differentials may arise from infinitesimally small differences in productivity; and a progressive wage tax will be welfare-enhancing.
Item Type: | Book Section |
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Keywords: | wage structure, efficiency wages, dual labor market, discrimination, turnover, wage taxation, income taxation |
Faculties: | Economics > Chairs > Chair of Institutional Economics (closed) Economics |
Subjects: | 300 Social sciences > 300 Social sciences, sociology and anthropology 300 Social sciences > 330 Economics |
JEL Classification: | J31, J41, J63, J71, H21, H24 |
URN: | urn:nbn:de:bvb:19-epub-1254-6 |
Place of Publication: | Berlin |
Language: | English |
Item ID: | 1254 |
Date Deposited: | 11. Dec 2006 |
Last Modified: | 04. Nov 2020, 12:45 |