Skip to main content

Advertisement

Log in

Efficiency Wages, Productivity and Simultaneity: A Meta-Regression Analysis

  • Published:
Journal of Labor Research Aims and scope Submit manuscript

Abstract

This study reports a meta-analysis of 75 estimates of the efficiency-wage effect. It reveals a strong efficiency-wage effect that depends upon whether researchers control for potential simultaneity between wages and productivity. Studies that control for simultaneity tend to report stronger effects. Clear evidence of publication selection is also found. E24, J30.

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

Access this article

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

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. Nor was any study omitted due to language, and foreign language studies were coded and included in our database. We were unable to acquire only two papers out of over 100 that may or may not have contained empirical estimates. Both of these papers were published in very narrowly circulating journals unavailable in the US, one in the Netherlands and the other in Turkey. We are satisfied that our search strategy was comprehensive. One should make every effort to include all studies, and we did. Several unpublished studies are among these 14 included studies. By beginning with lists that were much larger than the actual population of studies reporting empirical estimates of the efficiency-wage hypothesis, we minimize the probability of missing a relevant study.

  2. We choose the wage-elasticity of production as our measure of the efficiency-wage effect solely to maximize both the number of relevant studies included and the number of comparable estimates available. Approximately an equal number of studies tested or estimated some entirely different aspect of the efficiency-wage hypothesis. However, these other empirical measures were quite idiosyncratic, and none were commensurable with more than one or two other studies. Other dimensions of EWH investigated in this literature include: wage and market share, wage differentials measured in several incompatible ways, days taken off when not sick, calorie intake and productivity, wage and conflict, work effort, wage and reservation wage, employer size, pricing, job autonomy, wages and tax evasion, supervision and wages, worker turnover, and the gender wage gap. We see no reasonable way to pool these diverse dimensions of the efficiency-wage hypothesis without threatening the validity of the meta-analysis on the larger and more homogeneous set of wage elasticities of production.

  3. The difference between these estimates of average wage elasticity is due to publication selection bias (discussed below).

  4. Taking this robustness check to an extreme, we re-ran our simple MRA model (column 1 Table 1) after discarding all estimates from either unpublished studies or those which use data from developing nations. Doing so gives identical results about the existence and magnitude of the efficiency-wage elasticity and the presence of publication selection. Similarly, in a multivariate context (columns 4–6 Table 1), accounting for whether the data comes from a developed country has no significant effect and drops out of the estimated MRA model. Our findings concerning the existence and magnitude of the corrected efficiency-wage elasticity and the presence of publication selection bias are extremely robust.

  5. The only difference is that some of the other variables become statistically insignificant, especially when robust regressions are employed.

  6. Because the dependent variable in all of these MRA models is the observed t-value, R2 must be re-calculated to reflect the MRA’s explanatory power for reported elasticities, rather than their t-values.

References

  • Akerlof GA (1982) Labor contracts as partial gift exchange. Q J Econ 97:543–569

    Article  Google Scholar 

  • Akerlof GA (2002) Behavioral macroeconomics and macroeconomic behavior. Am Econ Rev 92:411–33

    Google Scholar 

  • Blanchard O, Summers LH (1986) Hysteresis in European unemployment. NBER Macroeconomics Annual 1:15–78

    Article  Google Scholar 

  • Card D, Krueger AB (1995) Time-series minimum-wage studies: a meta-analysis. Am Econ Rev 85:238–43

    Google Scholar 

  • Disdier A, Head K (2008) The puzzling persistence of the distance effect on bilateral trade. Rev Econ Stat 90:37–48

    Article  Google Scholar 

  • Doucouliagos C (2005) Publication bias in the economic freedom and economic growth literature. J Econ Surv 19:367–389

    Google Scholar 

  • Doucouliagos C, Stanley TD (2009) Publication selection bias in minimum-wage research? A meta-regression analysis. Forthcoming in the British Journal of Industrial Relations

  • Gemmill MC, Costa-Font J, McGuire A (2007) In search of a corrected prescription drug elasticity estimate: a meta-regression approach. Health Econ 16:627–643

    Article  Google Scholar 

  • Krueger AB, Summers LH (1988) Efficiency wages and the inter-industry wage structure. Econometrica 56:259–293

    Article  Google Scholar 

  • Mookerjee R (2006) A meta-analysis of the export growth hypothesis. Econ Lett 91:395–401

    Article  Google Scholar 

  • Rose AK, Stanley TD (2005) A meta-analysis of the effect on common currency on international trade. J Econ Surv 19:347–365

    Google Scholar 

  • Shapiro K, Stiglitz JE (1984) Equilibrium unemployment as a worker discipline device. Am Econ Rev 74:433–444

    Google Scholar 

  • Solow RM (1979) Another possible source of wage stickiness. J Macroecon 1:79–82

    Article  Google Scholar 

  • Stiglitz JE (1976) The efficiency wage hypothesis, surplus labor and the distribution of income in LDC’s. Oxf Econ Pap 28:185–207

    Google Scholar 

  • Stanley TD (2001) Wheat from chaff: meta-analysis as quantitative literature review. J Econ Perspect 15:131–150

    Article  Google Scholar 

  • Stanley TD (2005) Beyond publication bias. J Econ Surv 19:309–45

    Google Scholar 

  • Stanley TD (2008) Meta-regression methods for detecting and estimating empirical effect in the presence of publication selection. Oxf Bull Econ Stat 70:103–127

    Google Scholar 

  • Stanley TD, Jarrell SB (1989) Meta-regression analysis: a quantitative method of literature surveys. J Econ Surv 3:54–67

    Google Scholar 

  • Stanley TD, Jarrell SB (1998) Gender wage discrimination bias? A meta-regression analysis. J Hum Resour 33:947–973

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to T. D. Stanley.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Krassoi Peach, E., Stanley, T.D. Efficiency Wages, Productivity and Simultaneity: A Meta-Regression Analysis. J Labor Res 30, 262–268 (2009). https://doi.org/10.1007/s12122-009-9066-5

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12122-009-9066-5

Keywords

Navigation