productivity increases shift perfect competition

Firms also thought that it would damage moral and reduce effort.

Firms felt that they would lose their best workers. Campbell and Kamlani 1997) surveyed 184 firms and found that most firms were reluctant to cut wages in a recession. This does not appear to vary much across different industries. A simple model would suggest that wages are set once a year. (Barattieri, Basu, and Gottschalk 2010) analysed wage setting in the US and found that wages were sticky. It is assumed that wages and prices are not adjusting continuously but are changed infrequently. At the extremes, there are perfectly competitive and monopolistic markets. The greater the market power, the more firms are able to increase their mark-up or profit margins.

There can be changes in the level of competition based on the number of firms in an industry. The model for the supply side of the economy is also based on monopolistic-competition where firms have market power to set prices. The efficiency wage idea was first proposed by (Shapiro and Stiglitz 1984) in a paper called Equilbrium Unemployment as a Worker Discipline Device. 13.1 The monetary transmission mechanismĮfficiency Wage model (Carlin and Soskice 2015).12.3 Eurozone governance, sovereign risk and banking.8.5 Schumpeterian growth: the Aghion-Howitt model.

7.3 The GFC compared to the Great Depression.7.1 Pre-crisis system: incentives, instruments and actors.6.4 Financial Accelerator and balance sheet recessions.6.2 Financial crisis and the business cycle.5 Money, Banking and the Financial Sector.2.5 The labour market and the business cycle.2.3 Changes in equilibrium unemployment.

Productivity increases shift perfect competition