TY  - JOUR
AU  - Dickens,William T.
AU  - Katz,Lawrence F.
AU  - Lang,Kevin
TI  - Are Efficiency Wages Efficient?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1935
PY  - 1986
Y2  - May 1986
UR  - http://www.nber.org/papers/w1935
L1  - http://www.nber.org/papers/w1935.pdf
N1  - Author contact info:
William Dickens
School of Public Affairs
University of Maryland
College Park, Maryland  20742-1821
Tel: 301 405-3494
E-Mail: wtdickens@gmail.com

Lawrence F. Katz
Department of Economics
Harvard University
Cambridge, MA  02138
Tel: 617/495-5148
Fax: 617/613-1245
E-Mail: lkatz@harvard.edu

Kevin Lang
Department of Economics
Boston University
270 Bay State Road
Boston, MA  02215
Tel: 617/353-5694
Fax: 617/353-4001
E-Mail: lang@bu.edu
AB  - Efficiency wage models have been criticized because worker malfeasance
can be prevented in a pareto efficient manner by requiring workers to post a bond
which they lose if they are caught cheating. However, since it is costly to
monitor workers and costless to demand a larger bond, firms should pay nothing
for monitoring and demand very large bonds. Since we observe that firms devote
considerable resources to monitoring workers, bonds must be limited. Therefore
firms must use second best alternatives -- intensive monitoring and/or efficiency
wages. The payment of efficiency wages cannot be ruled out on a priori theoretical
grounds.
ER  -