DP133 | Efficiency Wages Versus Insiders and Outsiders

Publication Date

01/10/1986

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Abstract

This paper compares two theories of involuntary unemployment: the efficiency-wage theory and the insider-outsider theory. We indicate that one of the central problems in providing microfoundations for the existence of involuntary unemployment is to explain why there is no underbidding, and we compare the two theories in this contex.