Skip to main content

Advertisement

SpringerLink
Log in

The Choice of Wage Rate and Incentive for Labour Productivity Maximization

  • Research Note
  • Published:
The Indian Journal of Labour Economics Aims and scope Submit manuscript

Abstract

This paper utilizes the computable general equilibrium model to capture the labour productivity of workers and establishes the optimal wage rate and incentive level that maximize labour productivity for the firm. Over time, the household accepts these wage rates and incentives from the firm and maximizes her utility. As such, equilibrium is maintained in the economy. The market price is sticky in the short run, and thus, the dynamic changes in the preference of the household for leisure and labour hour distort the equilibrium price level. Restoring equilibrium entails adjusting the wage rate level in our model. In addition, our model shows that the household demands for more consumption goods and leisure as earnings increase.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

References

  • Aguiar, M., and G. Gopinath. 2007. Emerging Market Business Cycles: The Cycle is the Trend. Journal of Political Economy 115(1): 69–102.

    Article  Google Scholar 

  • Barton, H.H., A.N. Jack, and O. Hideo. 2003. Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation. Journal of Political Economy 111(3): 213–276.

    Google Scholar 

  • Bishnupriya, G. 2011. Wages, Union, and Labour Productivity: Evidence from Indian Cotton Mills. Economic History Review 64(1): 76–98.

    Google Scholar 

  • Edward, P. L., 1996. Performance Pay and Productivity. Massachusset, Working Paper No. 5672, National Bureau of Economic Research (NBER).

  • Edward, P.L., and L.M. Robert. 1984. Incentives, Productivity, and Labour Contracts. Quarterly Journal of Economics 99(2): 275–296.

    Article  Google Scholar 

  • Eliav, D., and D. Leif. 2015. A Pareto-improving Minimum Wage. Economica 82(1): 236–252.

    Google Scholar 

  • Moro, B. 2008. The Theory of the Revenue Maximizing Firm. Journal of Service Science and Management 1(1): 172–192.

    Article  Google Scholar 

  • Oriana, B., B. Iwan, and I. Rasul. 2013. Team Incentives: Evidence from a Firm Level Experiment. Journal of the European Economic Association 11(5): 1079–1114.

    Article  Google Scholar 

  • Raymond, P.G., and B.J. Kelsey. 2015. Incentives, Selection, and productivity in Labour Market: Evidence from Rural Malawi. Chicago: University of Chicago.

    Google Scholar 

  • Shearer, B. 2004. Piece Rates, Fixed Wages, and Incentives: Evidence from a Field Experiment. The Review of Economic Studies 71(2): 513–534.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Wang Yanan Institute for Studies in Economics (WISE), Xiamen University, N106, Economics Building (WISE&SOE), 422 South Siming Road, Xiamen, 361005, China

    David Iheke Okorie

Authors
  1. David Iheke Okorie
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to David Iheke Okorie.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Okorie, D.I. The Choice of Wage Rate and Incentive for Labour Productivity Maximization. Ind. J. Labour Econ. 62, 279–290 (2019). https://doi.org/10.1007/s41027-019-00177-6

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s41027-019-00177-6

Keywords

JEL Classification

Search

Navigation