Efficiency Wages, Unemployment, And Labor Discipline

Abstract

This paper explores the economic implications of unemployment by appealing to efficiency wage models.  Agency issues in labor markets are first surveyed and discussed, providing the foundation for a detailed analysis and synthesis of two shirking models using uniform language and terminology.  The use of a class-based analysis shows that unemployment disciplines both unemployed and employed labor, and explains the presence of unemployment as an equilibrium phenomenon.  The economic effects of unemployment on wages, employee effort, labor surveillance, and other aspects, such as unemployment duration, are developed and explored.