Economics Department Working Paper Series
Working Paper Number
2004-4
Publication Date
2004
Abstract
This paper analyses the inlfuence of norms of fairness on wage formation. Fairness is defined by 'real-wage' and 'relative-wage' norms that relate wage offers to workers' own current wage and to the wages of other groups of workers, and, to avoil shirking, firms pay their wages. The wage norms change endogenously, and the result is hysteresis with respect to both employment and the distribution of wages. An extention of the model that allows 'induced overeducation' may help explain trends in wage inequality.
DOI
https://doi.org/10.7275/1069259
Recommended Citation
Skott, Peter, "Fairness as a Source of Hysteresis in Employment and Relative Wages" (2004). Economics Department Working Paper Series. 71.
https://doi.org/10.7275/1069259