Do Labor Rents Justify Strategic Trade and Industrial Policy?
Several efficiency wage theories of wage determination have the property that identical workers are more productive in high wage industries and that the promotion of employment in high wage industries can increase GDP (and some measures of welfare). I argue that while policies to favor high wage industries may increase productivity, the effects in developed economies are likely to be very small. This is mainly because the workers who fill the high wage vacancies will come from fairly high wage jobs.
Document Object Identifier (DOI): 10.3386/w5137
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