The employment relationship is to a large extent characterized by incomplete contracts, in which workers have a considerable degree of discretion over the choice of their work effort. This discretion at work kicks in the potential importance of “gift exchange” or reciprocity between workers...

This paper models the firm as a community à la Akerlof (1980) to account for asymmetric behavior, and in particular, downward rigidity of wages. It is shown that, through social interaction among workers in the firm community, wage cuts can give rise to a large, discontinuous fall in labor...

This paper proposes a labor-adverse selection model where labor quality within an individual firm negatively depends upon the average working hours in the market. Under this setting, labor quality is a "pure public good" by nature, and the free market equilibrium will result in inefficient...

The efficiency wage theory is generally regarded as a plausible explanation as to why wages do not fall to clear labor markets in the presence of involuntary unemployment. At the current stage of its development, not much is said concerning the role of nominal money and the fluctuations in...