SNB: Firms factor in effort when determining wages
A Swiss National Bank paper on wage setting published on 14 June shows firms are aware of the workers' reciprocity motive and set wages so as to elicit a profit-maximising level of effort.
The authors, Jean-Pierre Danthine and André Kurmann, develop a reciprocity-based model of wage determination to assess the ability to generate the distinct dynamics of prominent macroeconomic aggregates in response to various exogenous shocks.
They find that among potential determinants of wages, rent-sharing
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