An examination of the Shapiro-Stiglitz Shirking model and the link between unemployment and its association with the real wage.
Written in 2005; 1,451 words; 4 sources; MLA; $ 48.95
Paper Summary:
This paper examines how the Shapiro-Stiglitz model clearly defines the real wage as rigid, while the unemployment rate is a factor of that wage and how it is that unemployment that can be used as a worker discipline device to reduce a firm's cost in monitoring workers. It concludes that the model is very useful in describing general labor market tendencies and in describing human behavior as a factor of wages.
From the Paper:
"One of the most important assumptions in the Shapiro-Stiglitz shirking model is the fact that firms do not have complete information about the workers effort level. In this scenario firms have two options: either to instigate methods of monitoring worker's effort level, which is a very costly and inefficient solution; or to pay workers a higher than market level wage in order to provide enough incentive for the worker not to shirk. In the Shapiro-Stiglitz model the worker has two alternatives: either to work or to shirk."
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