TY - JOUR
T1 - The interaction between efficiency wage theories and labour turnover costs
AU - Toulemonde, E.
N1 - Copyright 2004 Elsevier Science B.V., Amsterdam. All rights reserved.
PY - 2003/4/1
Y1 - 2003/4/1
N2 - We develop a simple model to illustrate how the effects of turnover costs on wages can be reinforced by an efficiency wage effect. The insider-outsider theory explains why labour turnover costs allow the insiders to earn higher wages than outsiders. According to the efficiency wage theory, higher wages enhance the insiders' productivity. Therefore, the costs of replacing an insider by a low-paid, low-productivity outsider are increased, which allows the insiders to raise their wages further. Again, higher wages increase insiders' productivity, which allows them to earn still higher wages, and so on. Thus, the existence of a link between effort and wages can reinforce the effects of labour turnover costs on wages.
AB - We develop a simple model to illustrate how the effects of turnover costs on wages can be reinforced by an efficiency wage effect. The insider-outsider theory explains why labour turnover costs allow the insiders to earn higher wages than outsiders. According to the efficiency wage theory, higher wages enhance the insiders' productivity. Therefore, the costs of replacing an insider by a low-paid, low-productivity outsider are increased, which allows the insiders to raise their wages further. Again, higher wages increase insiders' productivity, which allows them to earn still higher wages, and so on. Thus, the existence of a link between effort and wages can reinforce the effects of labour turnover costs on wages.
UR - http://www.scopus.com/inward/record.url?scp=0037390129&partnerID=8YFLogxK
M3 - Article
VL - 55
SP - 203
EP - 208
JO - Bulletin of Economic Research
JF - Bulletin of Economic Research
ER -