Year: 1989
Author: Pichler, Eva
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 109 (1989), Iss. 3 : pp. 421–430
Abstract
The paper presents a model, in which the relation between efficiency and equity does not necessarily appear as a trade-off: it is possible that both variables can be improved simultaneously, too. It is assumed that within of the firm wages are paid according to fixed shares of total output. Two workers maximize individual utility by choosing an optimal level of effort, given costs and revenue of effort (the latter by Cobb / Douglas production functions). It is shown, that a relatively more uniform and a relatively more uneven distribution of wages (compared to a structure of wages according to marginal productivity) leads to negative output effects if workers are heterogenous. Those losses of efficiency grow with an increasing distortion of the distributional shares.
Journal Article Details
Publisher Name: Global Science Press
Language: Multiple languages
DOI: https://doi.org/10.3790/schm.109.3.421
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 109 (1989), Iss. 3 : pp. 421–430
Published online: 1989-03
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 10