Employment and Unemployment
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firms willingly pay wages above the market-clearing wage to increase worker productivity
Last updated 11:46 AM on 3/30/25
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6 Terms
1
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Efficiency wage
When firms willingly pay wages above the market-clearing wage to increase worker productivity
2
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3
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4
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What are the main reasons firms might pay above-market wages?
To reduce turnover
attract higher-quality candidates
Enhance motivation and productivity
Discourage shirking among employees.
5
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Why does an increase in productivity increase the labour demand
Because it increases the marginal value product of labor
6
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What is the natural rate of unemployment
Structural + frictional
Note 
Flashcards (25)