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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.

The role of efficiency wages is reviewed in the traditional international economics theory, new economic geography and the neo‐Schumpeterian perspective towards international competitiveness.

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.

To the author's knowledge, this paper is the only review in the literature that concentrates on efficiency wages applied in international trade.

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.

Following a description of various wage theories, a conceptual analysis maps the evolutionary process of efficiency wage theory.

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.

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.

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.

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.

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.

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.

This is the first study of this particular issue.

This paper aims to explore the effects of fiscal policy in an economy with efficiency wages, consumption taxes and a common income tax rate.

A dynamic general-equilibrium model with the government sector is calibrated to Bulgarian data (1999–2018). Two regimes are compared and contrasted – the exogenous (observed) vs optimal policy (Ramsey) case.

The main findings are as follows: (1) The optimal steady-state income tax rate is zero. (2) The benevolent Ramsey planner provides three times lower amount of the utility-enhancing public services. (3) The optimal steady-state consumption tax needed to finance the optimal level of government spending is 18.7%.

The focus of the paper is on the relative importance of consumption vs income taxation, as well as on the provision of utility-enhancing public services. Bulgarian economy was chosen as a case study due to its major dependence on consumption taxation as a source of tax revenue.

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-08-2021-0488.

Efficiency wage theory predicts that firms can induce worker effort by the carrot of high wages and/or the stick of monitoring worker performance. Another option available to firms is to tilt the remuneration package over time such that the lure of high future earnings acts as a deterrent to current shirking. On the assumption that firms strive for the optimal trade-off between these various instruments, we develop a two-period model of efficiency wages in which increased monitoring attenuates the gradient of the wage-tenure profile. Our empirical analysis, using two cross sections of matched employer-employee British data, provides robust support for this prediction.

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.

The purpose of the paper is to study how technology choice is affected by capital accumulation when there is unemployment and firms engage in oligopolistic competition.

In this infinite horizon model, unemployment results from the existence of efficiency wages. Consumers choose saving optimally, and there is capital accumulation. Firms producing intermediate goods engage in oligopolistic competition and choose technologies to maximize profits. A more advanced technology has a higher fixed cost but a lower marginal cost of production.

In the steady state, it is shown that an increase in population size or a decrease in the discount rate leads intermediate good producers to choose more advanced technologies and the wage rate increases. Interestingly, the equilibrium unemployment rate decreases with the size of the population.

In this model, unemployment results from the existence of efficiency wages and firms engage in oligopolistic competition. One difficulty with efficiency wage models is that saving is not allowed. However, in this model, consumers choose saving optimally, and capital accumulation is allowed. With oligopolistic competition, the authors show that an increase in population size or a decrease in the discount rate leads intermediate good producers to choose more advanced technologies and the wage rate increases. The equilibrium unemployment rate decreases with the size of the population.

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.

This paper aims to derive insights about optimal managerial compensation and firm capital structure in unionized firms.

This paper uses applied game theory to address problems of CEO motivation in companies with unionized workforces.

Managers can use high levels of debt and costly bankruptcy to win wage concessions from workers. Alternatively, workers can obstruct management in the detection of poor work. CEO compensation that encourages rent sharing may reduce union hostility and associated deadweight losses. Shareholder value may be maximized by CEO incentive contracts with limited upsides, lower levels of pay, and some entrenchment protections.

This is the only study to use applied game theory to look at how CEO pay and capital structure affects the productivity of a unionized workforce.

This paper aims to introduce the subject of the impact of globalization and regionalization on the labour markets. The papers of the special issue are placed within this subject.

Although the subject is not treated exhaustively, the papers presented are new contributions dealing with labour market institutions, efficiency wages, employment effects of outward foreign direct investment, immigration patterns, and regional social and labour policies. These diverse issues are dealt with in their relation with increasing globalization in developed economies.

The major conclusions of the papers in the special issue are put into the perspective of the state of the art of the research on the social impact of globalization, particularly the labour market consequences.

A more comprehensive analysis of globalisation, which takes into account the complementarity of the different channels through which its effects on labour markets are transmitted, becomes more and more necessary. The papers of the special issue attempt to look into a number of these channels and to some extent into their complementarity.