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The impact of sectoral shocks on an efficiency wage equilibrium

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  • Neill, Jon R.

Abstract

This paper analyzes a two-good economy wherein an efficiency wage is paid. Our objective is to determine how outputs, employment, and unemployment will change in response to both exogenous demand and supply shocks. Our principal conclusion is that demand shocks cannot explain decreases in production in both sectors of such an economy. The driver of this and our other conclusions is the role of relative prices in determining supply, and the labor market linkages between sectors.

Suggested Citation

  • Neill, Jon R., 2022. "The impact of sectoral shocks on an efficiency wage equilibrium," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 589-595.
    • Handle: RePEc:eee:quaeco:v:84:y:2022:i:c:p:589-595
    DOI: 10.1016/j.qref.2020.10.015
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    References listed on IDEAS

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    More about this item

    Keywords

    Efficiency wages; Demand shocks; Supply shocks; Unemployment;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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