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Pareto Inefficiency of Market Economies: Search and Efficiency Wage Models

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  • Greenwald, Bruce
  • Stiglitz, Joseph E

Abstract

This paper shows that market economies with search and in which wages are affected by efficiency wage considerations are not constrained Pareto efficient. Wages are not set at Pareto efficient levels, nor is the level of employment (unemployment) Pareto efficient. We identify the nature of the biases and the welfare improving government interventions.
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  • Greenwald, Bruce & Stiglitz, Joseph E, 1988. "Pareto Inefficiency of Market Economies: Search and Efficiency Wage Models," American Economic Review, American Economic Association, vol. 78(2), pages 351-355, May.
    • Handle: RePEc:aea:aecrev:v:78:y:1988:i:2:p:351-55
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    1. Pissarides, Christopher A, 1984. "Search Intensity, Job Advertising, and Efficiency," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 128-143, January.
    2. Arthur J. Hosios, 1984. "A Welfare Analysis of Employment Contracts with and without Asymmetric Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 471-489.
    3. Bruce C. Greenwald & Joseph E. Stiglitz, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 229-264.
    4. Arnott, Richard J & Stiglitz, Joseph E, 1985. "Labor Turnover, Wage Structures, and Moral Hazard: The Inefficiency of Competitive Markets," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 434-462, October.
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    1. #goofy5
      by Alberto Bagnai in Goofynomics on 2016-09-12 15:19:00

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