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Testing Dynamic Models of Worker Effort

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  • Machin, Stephen
  • Manning, Alan

Abstract

This article derives three dynamic models of worker effort determination based on a shirking efficiency wage model, a compensating differentials model, and a union-firm bargaining model. It shows that all of these three models have the same long-run comparative statics but differ in their short-run dynamics. The authors use these different predictions about the dynamics as a basis for testing the models. Euler equations for each model are estimated using panel data on 486 U.K. companies. The evidence supports the shirking model in firms with low levels of unionization but the bargaining model in highly unionized industries. Copyright 1992 by University of Chicago Press.

Suggested Citation

  • Machin, Stephen & Manning, Alan, 1992. "Testing Dynamic Models of Worker Effort," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 288-305, July.
    • Handle: RePEc:ucp:jlabec:v:10:y:1992:i:3:p:288-305
    DOI: 10.1086/298288
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    Citations

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    Cited by:

    1. Carol Propper & John Van Reenen, 2010. "Can Pay Regulation Kill? Panel Data Evidence on the Effect of Labor Markets on Hospital Performance," Journal of Political Economy, University of Chicago Press, vol. 118(2), pages 222-273, April.
    2. Alan Manning & J Thomas, 1997. "A Simple Test of the Shirking Model," CEP Discussion Papers dp0374, Centre for Economic Performance, LSE.
    3. repec:ebl:ecbull:v:10:y:2008:i:9:p:1-6 is not listed on IDEAS
    4. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
    5. Joyce P. Jacobsen & Gilbert L. Skillman, 2012. "Neoclassical Models of Imperfectly Competitive Labor Markets," Wesleyan Economics Working Papers 2012-007, Wesleyan University, Department of Economics.
    6. Thomas J. Carter, 1999. "Are Wages Too Low? Empirical Implications of Efficiency Wage Models," Southern Economic Journal, John Wiley & Sons, vol. 65(3), pages 594-602, January.
    7. K Clark & M Tomlinson, 2001. "The Determinants of Work Effort: Evidence from the Employment in Britain Survey," Economics Discussion Paper Series 0113, Economics, The University of Manchester.
    8. Ourania Karakosta & Nikos Tsakiris, 2009. "Indirect Tax Reforms and Public Goods under Imperfect Competition," University of Cyprus Working Papers in Economics 5-2009, University of Cyprus Department of Economics.
    9. John G. Sessions & Nikolaos Theodoropoulos, 2014. "Tenure, Wage Profiles and Monitoring," Research in Labor Economics, in: New Analyses of Worker Well-Being, volume 38, pages 105-162, Emerald Group Publishing Limited.
    10. Katarzyna Budnik, 2012. "Do those who stay work less? On the impact of emigration on the measured TFP in Poland," NBP Working Papers 113, Narodowy Bank Polski.
    11. Frank Walsh, 2012. "Efficiency wages and bargaining," Oxford Economic Papers, Oxford University Press, vol. 64(4), pages 635-654, October.
    12. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    13. Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2009. "Employer monopsony power in the labor market for undocumented workers," FRB Atlanta Working Paper 2009-14, Federal Reserve Bank of Atlanta.
    14. Fernando Zanella, 2008. "Different times, different commitments, but the same old practices: failure of the efficiency wage model for socially devoted firms," Economics Bulletin, AccessEcon, vol. 10(9), pages 1-6.
    15. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    16. Yoshitsugu Kitazawa & Makoto Ohta, 2002. "Testing the shirking version of the efficiency wage model in Japanese electric-machinery firms: a panel data approach," Applied Economics Letters, Taylor & Francis Journals, vol. 9(5), pages 335-338.

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