| This thesis empirically tests efficiency wage theories, and extends them theoretically. The empirical tests use a panel of firm-level data to see whether measures of wage differentials unrelated to human capital affect productivity. Firms that pay high relative wages for workers of similar quality have productivity gains approximately large enough to pay for the wage increases. Support is also found for rent-sharing theories of wage determination.;A new form of efficiency wages, based on the effects of wage dispersion on worker cohesiveness, is explored in the second theoretical chapter. The new consideration can help explain the stylized facts that there are important firm and industry wage effects, and that firms often pay relatively egalitarian wages. From a social point of view, the economy will under-provide egalitarian wages and cohesive workers, implying a possible role for policy.;When cohesiveness affects output restrictions, classic results from the sociology of work are reproduced in an almost neoclassical setting, as shown in the third theoretical chapter. For example, when there is the possibility of downward revision of piece rates, workers restrict output, and more cohesive workers restrict output more heavily. Rate busters tend to be those who have the lowest disutility of effort, and have the least responsiveness to peer pressure. Furthermore, ratebusters will always deviate from group norms substantially. Piece rate workers will oppose new technology, since they fear it will mask a cut in rates, and at the end of a production run when rates can not be cut, workers will increase output substantially.;The first theoretical chapter examines Weitzman's result that widespread profit sharing ensures both low levels of equilibrium unemployment and stability in the face of shocks. The benefits of a share economy come from the subsidy that current workers pay to marginal workers. In an efficiency-wage model, the wage subsidy paid by current workers costs the firm as much in lower productivity as it gains from lower labor costs. The share economy, therefore, leads to no reduction of the equilibrium unemployment rate, and the share economy is approximately as stable as the corresponding wage economy. |
