Efficiency Wage and Labor Discipline Models: Matched-Panel Evidence from Brazilian Construction Industry

The aim of this paper is to test the relationship between wage and workers’ labor effort for the Brazilian construction industry. This relationship is stated by both the shirking and the labor discipline versions of efficiency wage models. Actually workers’ labor effort is neither verifiable nor available for empirical tests, so the most of the empirical tests for this theory are performed by testing the trade-off between wages and supervision, and the trade-off between wages and the workers’ probability of termination. This paper provides empirical tests for both relationships, and the efficiency wage model hypothesis is empirically supported by this paper.