By relaxing the common efficiency wage assumption of exogenous shirking detection probabilities, we demonstrate how standards and efficiency wages are related. In a more general setting where the probability of detection depends upon the equilibrium effort level of non-shirkers, we show that the uniformly positive (negative) supply-side relationship between wages (unemployment insurance) and effort is no longer guaranteed. Profit maximization on the part of the firm, however, ensures that effort will depend positively (negatively) on wages (unemployment insurance) in equilibrium.
|Place of Publication||Aberdeen|
|Publisher||University of Aberdeen Business School|
|Number of pages||21|
|Publication status||Published - Mar 2016|
|Name||Discussion Paper in Economics|
|Publisher||University of Aberdeen|
- efficiency wages
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
Sessions, J. G., & Skatun, J. D. (2016). Shirking, Standards and the Probability of Detection. (pp. 1-21). (Discussion Paper in Economics; Vol. 16, No. 5). Aberdeen: University of Aberdeen Business School.