Efficiency Wage Theory
Definition of Efficiency Wage Theory / Hypothesis
The idea of the efficiency wage theory is that it may benefit firms to pay workers a wage higher than their marginal revenue product.
Efficiency wage theory The hypothesis that the productivity of workers depends on the level of the real wage rate.
While efficiency wage theory helps explain why unemployment may persist, other theories that focus on the implications of imperfect information in the capital markets can help explain economic volatility.
 See also: Productivity, Job, Saving, Asymmetric information, Welfare
  
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