302
MACROECONOMICS
SUMMARY
Firms pay higher than the market-clearing wages to elicit
effort, reduce turnover, recruit better workers, and improve
worker morale.
When firms have difficulty monitoring employees, they have
an incentive to offer a wage-employment package that deters
workers from shirking on the job.
Efficiency wages are the wages that maximize firm prof-
its when it is difficult to monitor whether workers work or
shirk.
Efficiency wages are higher than the competitive market
wage and generate involuntary unemployment.
The New Keynesian natural rate of unemployment is an equi-
librium labour market outcome where wages ...
Get Macroeconomics, 2nd Edition by Pearson now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
