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1 – 10 of over 16000The purpose of the paper was to establish the implications of globalisation for labour markets when efficiency wages create endogenous wage rigidity and to re‐examine the…
Abstract
Purpose
The purpose of the paper was to establish the implications of globalisation for labour markets when efficiency wages create endogenous wage rigidity and to re‐examine the credibility of the arguments that call for deregulation, more wage flexibility and less social protection in this context.
Design/methodology/approach
The role of efficiency wages is reviewed in the traditional international economics theory, new economic geography and the neo‐Schumpeterian perspective towards international competitiveness.
Findings
First, taking into account endogenous sources of wage rigidity has different implications for employment, inequality, regional growth convergence and the role of the welfare state in the context of international competitiveness, from those derived when assuming them away or taking them as imposed by labour market institutions. Second, policies that would substantially reduce social security or lead to cost‐cuts may have an adverse effect on effort and thus on productivity.
Originality/value
To the author's knowledge, this paper is the only review in the literature that concentrates on efficiency wages applied in international trade.
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Prosper F. Bangwayo-Skeete, Afaf H. Rahim and Precious Zikhali
– The paper aims to examine factors that influence individuals' preferences between wages indexed on job performance or efficiency over equity-based wages.
Abstract
Purpose
The paper aims to examine factors that influence individuals' preferences between wages indexed on job performance or efficiency over equity-based wages.
Design/methodology/approach
Generalized linear latent and mixed models (GLLAMM) are estimated on the 2005 wave of the World Values Survey on employed individuals from 43 countries.
Findings
Results suggest that employees' preference for efficiency-based wages increases with education and globalization, while it decreases with unemployment rates.
Research limitations/implications
Institutions and specifically public policies that promote education, and globalization, along with policies that reduce unemployment rates could be used to promote wage setting policies that reward performance or efficiency.
Originality/value
The originality of the study lies in its use of both individual- and country-level data to estimate GLLAMM that take into account the multi-level nature of the dataset. This study can inform firms and policymakers on what measures to adopt to promote preferences for efficiency-based wages among individuals.
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Rosetta A. Morris Morant and David C. Jacobs
The purpose of this paper is to trace the historical foundation of the efficiency wage theory and examine its conceptual framework against other wage theories, in relation to…
Abstract
Purpose
The purpose of this paper is to trace the historical foundation of the efficiency wage theory and examine its conceptual framework against other wage theories, in relation to conventional practices in human resource management.
Design/methodology/approach
Following a description of various wage theories, a conceptual analysis maps the evolutionary process of efficiency wage theory.
Findings
The concept of efficiency being applied to wages appears to evolve from Smith. The difference between the classical and the institutionalists’ perspectives appears to be the meaning ascribed to efficiency. Clark seemed to be the first one to examine the relationship between labor and productivity. Webb expanded the meaning of efficiency and demonstrated the relationship with productivity. Institutional and behavioral theorists further developed and advocated for efficiency wages. A synthesis of recent empirical studies provides support for the theory, which challenges conventional human resource management wage practices.
Practical implications
The findings solidify the usefulness of efficiency wage theory not only as a motivational management tool but also as a source for social and economic well-being.
Originality/value
The contribution of this historical account is that it synthesizes the root and development of efficiency wages theory. It also highlights the social context of the theory and provides an interface between economic and management perspectives.
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Jiangtao Li, Jianyue Ji and Yanxia Wang
Efficiency of a commercial bank affects both its competitiveness and the role it plays in the process of economic development. Although great efforts have been exerted in…
Abstract
Purpose
Efficiency of a commercial bank affects both its competitiveness and the role it plays in the process of economic development. Although great efforts have been exerted in developing the various aspects of banking efficiency, there seems to be a lack of research on examining the impact of the bank efficiency from the employee wage perspective. The mechanism of how employee wage affects commercial bank efficiency and the relationship between the two were analyzed in this paper. Based on the growing body of research on efficiency in banking, the aim of this paper is to examine if competitiveness of employee wages at any commercial bank has any impact on the bank efficiency score.
Design/methodology/approach
The method used was quantitative analysis, which was based on comparing the evaluated efficiencies of the banks with employee wages published in the bank reports. The empirical data in this paper were based on 16 Chinese listed commercial banks from 2004 to 2012. The per capita wage of commercial banks was selected as the wage indicator, and the efficiency value obtained by the slack-based measure (SBM) model was selected as the efficiency indicator. According to the calculated data, the Tobit regression model was built to analyze the relationship between employee wage and commercial bank efficiency.
Findings
The research results show that employee wage is the key variable that influences the efficiency of Chinese commercial banks, and the inverted U-shaped relationship between employee wage and commercial banks efficiency shows up.
Practical implications
The wage structure data of the composition of basic pay and bonus were not available at the time of conducting the research. Per capita wages were used instead to reflect the employee wage levels of Chinese banks.
Originality/value
This study can provide some help for the banking industry by analyzing the wage levels from the perspective of efficiency and also further enriches the theoretical system of the relationship between employee wage and bank efficiency.
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The purpose of this paper is to examine which forms of compensation are more efficient at affecting employee attitudes, thus extending efficiency wage theory from wage-based…
Abstract
Purpose
The purpose of this paper is to examine which forms of compensation are more efficient at affecting employee attitudes, thus extending efficiency wage theory from wage-based compensation to profit sharing and stock-based compensation.
Design/methodology/approach
Three models of efficiency wage theory were tested: shirking, turnover and gift exchange. The effects of those three modes of compensation (wages, profit sharing and stock) were contrasted for the three models of efficiency wage theory.
Findings
The findings were that raising wages is the most efficient form of compensation in the turnover and shirking models, while in the gift exchange model profit sharing and stock-based compensation may function like efficiency wages.
Originality/value
This is the first study of this particular issue.
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Details a behavioral theory of economic welfare that overlaps and extends the global theoretical framework contained in Pareto Optimality, with significant public policy…
Abstract
Details a behavioral theory of economic welfare that overlaps and extends the global theoretical framework contained in Pareto Optimality, with significant public policy implications. The essence of this framework is contained in Adam Smith’s the Wealth of Nations where it is argued that the economic welfare of society cannot be augmented if the material level of well‐being of the working population is reduced, even if the economy experiences growth. Moreover, it is argued that there need not be an equity‐efficiency trade‐off in a competitive market economy to the extent that wages positively affect productivity and do not increase production costs. Therefore, shifting from a low to a high wage economy is welfare improving. Smith, in effect, argues that one can have economic ‘justice’ and economic efficiency where the former is necessary to the latter. The behavioral model of economic welfare paints a dynamic picture of economic welfare in contradistinction to the static framework provided by Pareto Optimality wherein the conditions of Pareto Optimality need not be violated.
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Since the efficiency‐wage theory has graduated from a hypothesis to a model, there is the need for an establishedempirical foundation as the basis for continued confidence in…
Abstract
Since the efficiency‐wage theory has graduated from a hypothesis to a model, there is the need for an established empirical foundation as the basis for continued confidence in the model′s practical validity. To augment the efforts already made in this regard for the industrially developed labour markets, contributes an in‐depth empirical analysis of the model by explicit use of Nigerian data as a prototype of the less developed countries. The results show a very strong case for the empirical validity of the model.
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This chapter introduces a model of efficiency-wage competition along the lines put forward by Hahn (1987). Specifically, I analyze a two-firm economy in which employers screen…
Abstract
This chapter introduces a model of efficiency-wage competition along the lines put forward by Hahn (1987). Specifically, I analyze a two-firm economy in which employers screen their workforce by means of increasing wage offers competing one another for high-quality employees. The main results are the following. First, using a specification of effort such that the problem of firms is well-behaved, optimal wage offers are strategic complements. Second, the symmetric Nash equilibrium can be locally stable under the assumption that firms adjust their wage offers in the direction of increasing profits by conjecturing that any wage offer above (below) equilibrium will lead competitors to underbid (overbid) such an offer. Finally, the exploration of possible labor market equilibria reveals that effort is counter-cyclical.
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Manash Ranjan Gupta and Priya Brata Dutta
International tourism has experienced a substantial growth during the second half of twentieth century. Tourism development can contribute substantially to the reduction of…
Abstract
Purpose
International tourism has experienced a substantial growth during the second half of twentieth century. Tourism development can contribute substantially to the reduction of poverty problem by creating new employment opportunities. The purpose of this paper is to analyse the effect of tourism development on unemployment problem using an efficiency wage framework.
Design/methodology/approach
The authors developed a two-sector two-factor static competitive general equilibrium model of a less-developed open economy called South with an imported traded goods sector and with a non-traded tourism service sector, and with two factors, capital and labour. Labour is measured in efficiency unit; there exists unemployment in the labour market which is explained by the efficiency wage hypothesis. The authors also consider extensions of the basic model by introducing an exportable traded goods sector as well as sector-specific capital in the tourism sector.
Findings
The authors show that, with perfect intersectoral mobility of capital and with only one traded good, tourism development in South lowers unemployment rate and raises national income. However, this tourism development neither affects unemployment rate nor national income in South, in the mobile-capital model when there are two traded goods. When tourism sector uses sector-specific capital but capital is mobile between two traded goods sectors, tourism development keeps the unemployment rate unchanged but raises national income in South.
Originality/value
There exists a lot of debate about economic benefits of tourism development in a less-developed economy. A few works analyse the economic effects of tourism without developing formal models. However, no existing work analyses the effect on unemployment in an efficiency wage model. Although Harris–Todaro model is of relevance to explain unemployment in low-income countries, efficiency wage models are relevant for middle-income countries.
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In standard discussions (capitalistic economy), business firms and the income‐distribution property of production factors are dealt with in a manner in which they are independent…
Abstract
In standard discussions (capitalistic economy), business firms and the income‐distribution property of production factors are dealt with in a manner in which they are independent from each other and there is no interaction as such between them. Furthermore, no role whatso‐ever is assumed for externalities. If we accept that there is interaction between production factors and these factors because of the existence of externalities affects each other, therefore it is only natural to come to this conclusion that both the definition of business firm and the share of production factors should be changed. The proposal developed in this paper is based on this very important consideration. The profit share of Mudareb (profit‐sharing agent) has been used in this paper to cover more general issues, such as labor's income share in an Islamic system. The Mudareb's relative share might be justified on the grounds that he has the appropriate expertise, profession, so to speak. This justification can be extended to “labor” in general, be it in industry, services, and other economic activities. It seems that, it is not only the degree of expertise and skill which determines the labor's share, but also its interaction with other expertises which makes one qualified to share part of the profit. This interaction provides better results than the same of individual skills. The application of the proposal not only increases output and hence the total revenue of a firm, but also helps keep the production cost at its lowest possible level. Furthermore, it leads one to look at a firm as an interacting body of different expertise. Increase in efficiency together with low production costs are to the mutual benefits of both the workers and the firm. Furthermore, there would not only be zero monitoring cost, but also eliminates shirking while increasing the effort of the workers to its maximum level.