abstract: 'The efficiency wage is an important topic in the theory of employment.

  In a traditional efficiency wage model, only the representative firm is

  optimizing against an assumed S-shaped effort supply function. This

  S-shaped supply curve is critical for the model and the absence of a

  derivation of the curve in the literature means that it is an incomplete

  theory. In the present paper, we extend the model by specifying a

  worker''s representative utility function so that the corresponding

  argmax function will be the S-shaped effort supply curve. This will make

  the worker''s decision process endogenous and will produce a more

  complete model. The importance of this extension is clear. The

  characterization of the utility function will make explicit the

  necessary conditions and crucial assumptions of the traditional model.

  More importantly, the extension will allow researchers to introduce

  employment compensation factors into the worker''s utility function for

  analysis. This has important bearings on future development in

  employment theory. For example, a worker''s satisfaction from shirking

  (net of dismissal risks), or his or her willingness to search for jobs

  (net of search cost), can now be included in his or her utility function

  to form an optimal work or search strategy. Incorporating the worker''s

  optimization behaviour into the model will also enable researchers to

  study policy directed not just towards firms but also towards the

  worker''s decision process. Furthermore, this approach provides a

  framework for researchers to generate comparative statics. These

  comparative statics can lead to interesting topics for econometric

  models or to further research within this field.'
affiliation: 'Wu, JSK (Corresponding Author), Univ Hong Kong, Sch Econ \& Finance,
  KK Leung Bldg,Pokfulam Rd, Hong Kong, Hong Kong, Peoples R China.

  Wu, Joseph S. K.; Ho, Chi Pui, Univ Hong Kong, Hong Kong, Hong Kong, Peoples R China.'
author: Wu, Joseph S. K. and Ho, Chi Pui
author-email: josephwu@econ.hku.hk
author_list:
- family: Wu
  given: Joseph S. K.
- family: Ho
  given: Chi Pui
da: '2023-09-28'
doi: 10.1111/1468-0106.12003
eissn: 1468-0106
files: []
issn: 1361-374X
journal: PACIFIC ECONOMIC REVIEW
keywords-plus: 'LABOR-MARKETS; MODEL; UNEMPLOYMENT; PRODUCTIVITY; HYPOTHESIS;

  INEQUALITY; NUTRITION; RIGIDITY; INCOME; SIZE'
language: English
month: DEC
number: '5'
number-of-cited-references: '44'
pages: 660-676
papis_id: c58b3f8a9f9441281ce75ef74645442b
ref: Wu2012morecomplete
times-cited: '4'
title: TOWARDS A MORE COMPLETE EFFICIENCY WAGE THEORY
type: article
unique-id: WOS:000314515300003
usage-count-last-180-days: '0'
usage-count-since-2013: '18'
volume: '17'
web-of-science-categories: Economics
year: '2012'