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Title:Efficiency-wage hypothesis and the operational production pattern PDF Logo
Authors:Naqvi, Nadeem
Schürg, Carolin V.
Issue Date:2011
Series/Report no.:Joint discussion paper series in economics 46-2011
Abstract:An economy's production set is the collection of all net output vectors that the economy is capable of producing with a given technology and fixed quantities of primary factors of production. The boundary of this set is called the production possibility frontier or PPF. We show that, if the efficiency-wage hypothesis holds, a country's PPF, though conceptually valid, is an operationally irrelevant concept, because the economy never operates on the PPF, which is a view that ought to be appreciated in light of persistent unemployment in the new structure of economies of the post-21st-Century-crisis world.
Subjects:general equilibrium
production set
production possibility frontier
efficiency wage
economic policy
labor market
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

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