IDEAS home Printed from https://ideas.repec.org/p/cep/cepdps/dp0374.html
   My bibliography  Save this paper

A Simple Test of the Shirking Model

Author

Listed:
  • Alan Manning
  • J Thomas

Abstract

Although popular in some circles, efficiency wage models of the labour market have proved surprisingly difficult to test and direct evidence for the central tenets of the theory is rare to non-existent. In this paper we propose a simple test of the Shapiro-Stiglitz shirking model which is based on the following idea. In the traditional search model the distribution of accepted wages should be truncated below by the reservation wage. But, if shirking is important then the employer will never want to employ a worker at their reservation wage and the distribution of accepted wages should be truncated below by the reservation wage plus something. That something is a measure of the importance of shirking. We test this prediction using data from the UK Survey of Incomes In and Out of Work. The results are not particularly supportive of the shirking model.

Suggested Citation

  • Alan Manning & J Thomas, 1997. "A Simple Test of the Shirking Model," CEP Discussion Papers dp0374, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0374
    as

    Download full text from publisher

    File URL: https://cep.lse.ac.uk/pubs/download/DP0374.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Wadhwani, Sushil B & Wall, Martin, 1991. "A Direct Test of the Efficiency Wage Model Using UK Micro-data," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 529-548, October.
    2. Christensen, Bent Jesper & Kiefer, Nicholas M, 1994. "Measurement Error in the Prototypal Job-Search Model," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 618-639, October.
    3. 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.
    4. Michael P. Keane, 1993. "Individual Heterogeneity and Interindustry Wage Differentials," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 134-161.
    5. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-538, June.
    6. MacLeod, W. Bentley & Malcomson, James M., 1993. "Wage premiums and profit maximization in efficiency wage models," European Economic Review, Elsevier, vol. 37(6), pages 1223-1249, August.
    7. Heckman, James J, 1984. "The x[superscript]2 Goodness of Fit Statistic for Models with Parameters Estimated from Microdata," Econometrica, Econometric Society, vol. 52(6), pages 1543-1547, November.
    8. Christensen, Bent Jesper & Kiefer, Nicholas M., 1991. "The Exact Likelihood Function for an Empirical Job Search Model," Econometric Theory, Cambridge University Press, vol. 7(4), pages 464-486, December.
    9. Blau, David M, 1991. "Search for Nonwage Job Characteristics: A Test of the Reservation Wage Hypothesis," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 186-205, April.
    10. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    11. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-620, September.
    12. Levine, David I, 1992. "Can Wage Increases Pay for Themselves? Tests with a Production Function," Economic Journal, Royal Economic Society, vol. 102(414), pages 1102-1115, September.
    13. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    14. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-480, March.
    15. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Manning, Alan, 1999. "Pretty vacant: recruitment in low wage labour markets," LSE Research Online Documents on Economics 20231, London School of Economics and Political Science, LSE Library.
    2. Barbara Petrongolo & Christopher Pissarides, 2006. "Scale Effects in Markets with Search," Economic Journal, Royal Economic Society, vol. 116(508), pages 21-44, January.
    3. Rocheteau, Guillaume, 2001. "Equilibrium unemployment and wage formation with matching frictions and worker moral hazard," Labour Economics, Elsevier, vol. 8(1), pages 75-102, January.
    4. 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.
    5. Andreas P. Georgiadis, 2006. "Is there a Wage-Supervision Trade-Off? Efficiency Wages Evidence From the 1990 British Workplace Industrial Relations Survey," The Centre for Market and Public Organisation 06/152, The Centre for Market and Public Organisation, University of Bristol, UK.
    6. Andreas Georgiadis, 2013. "Efficiency Wages and the Economic Effects of the Minimum Wage: Evidence from a Low-Wage Labour Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 962-979, December.
    7. Stefano Dughera & Alain Marciano, 2022. "Supervise me if you can. Relational feelings, incentive pays and supervisory violations," Journal of Economics, Springer, vol. 136(1), pages 47-72, June.
    8. Dagmar Brožová, 2016. "Forming the Modern Labour Market Economics: On the Role of Institutionalist Theories [Utváření moderní ekonomie trhů práce: neoklasické paradigma s institucionálními teoriemi]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2016(6), pages 56-68.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    2. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    3. Pierre Cahuc & André Zylberberg, 1994. "Que reste-t-il de la théorie du salaire d'efficience ?," Revue Économique, Programme National Persée, vol. 45(3), pages 385-398.
    4. Måns Söderbom & Francis Teal & Anthony Wambugu, 2002. "Does firm size really affect earnings?," CSAE Working Paper Series 2002-08, Centre for the Study of African Economies, University of Oxford.
    5. Francis Teal & Måns Söderbom, 2002. "Does firm size really affect earnings?," Economics Series Working Papers WPS/2002-08, University of Oxford, Department of Economics.
    6. Alan Carruth & Bill Collier & Andy Dickerson, 1999. "Inter-industry Wage Differences and Individual Heterogeneity: How Competitive is Wage Setting in the UK?," Studies in Economics 9914, School of Economics, University of Kent.
    7. Sonia R Bhalotra, 1998. "Investigating Rationality in Wage-Setting," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 10, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    8. 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.
    9. Francis Teal & Måns Söderbom, 2001. "Firm size and human capital as determinants of productivity and earnings," Economics Series Working Papers WPS/2001-09, University of Oxford, Department of Economics.
    10. Rym Ben Ayed Mouelhi & Mohamed Goaied, 2001. "Efficience technique et incitations salariales. Analyse empirique sur un panel incomplet des industries textiles en Tunisie," Économie et Prévision, Programme National Persée, vol. 148(2), pages 99-111.
    11. 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.
    12. Yang, Sheng-Ping & DeBeaumont, Ronald, 2010. "Pay as incentive or pay as reward? The case of Taiwan," Journal of Asian Economics, Elsevier, vol. 21(1), pages 76-86, February.
    13. Seref Saygili, 1998. "Is the Efficiency Wage Hypothesis Valid for Developing Countries? Evidence from the Turkish Cement Industry," Studies in Economics 9810, School of Economics, University of Kent.
    14. 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.
    15. Reynaud Benedicte, 1987. "Règles et l'incomplétude du contrat de travail dans le paradigme standard (les)," CEPREMAP Working Papers (Couverture Orange) 8742, CEPREMAP.
    16. Sabrina T Howell & J David Brown, 2023. "Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms," The Review of Financial Studies, Society for Financial Studies, vol. 36(5), pages 1889-1929.
    17. Michael Vlassopoulos, 2017. "‘Putting a Foot in the Door’: Volunteer Hiring and Organizational Form," Manchester School, University of Manchester, vol. 85(2), pages 133-162, March.
    18. 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.
    19. Veronique Genre & Karsten Kohn & Daphne Momferatou, 2011. "Understanding inter-industry wage structures in the euro area," Applied Economics, Taylor & Francis Journals, vol. 43(11), pages 1299-1313.
    20. Bai, Peiwen & Cheng, Wenli, 2020. "Relative earnings and firm performance: Evidence from publicly-listed firms in China, 2005–2012," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 279-290.
    21. Kevin Lang, 2020. "Effort and wages: Evidence from the payroll tax," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 108-139, February.
    22. Nils Gottfries & Tomas Sjostrom, 2000. "Insider Bargaining Power, Starting Wages and Involuntary Unemployment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(4), pages 669-688, December.

    More about this item

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0374. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://cep.lse.ac.uk/_new/publications/discussion-papers/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.