Acknowledgments 1. Introduction 2. Methods 3. Time and Location 4. Morale 5. Company Risk Aversion 6. Internal Pay Structure 7. External Pay Structure 8. The Shirking Theory 9. The Pay of New Hires in the Primary Sector 10. Raises 11. Resistance to Pay Reduction 12. Experiences with Pay Reduction 13. Layoffs 14. Severance Benefits 15. Hiring 16. Voluntary Turnover 17. The Secondary Sector 18. The Unemployed 19. Information, Wage Rigidity, and Labor Negotiations 20. Existing Theories 21. Remarks on Theory 22. Whereto from Here? Notes References Index
To call this book a breath of fresh air is an understatement. The direct insights are fascinating, and Truman Bewley's use of them is sharp and insightful. Labor economists and macroeconomists have a lot to think about. -- Robert M. Solow, Nobel Laureate, Institute Professor of Economics, Emeritus, Massachusetts Institute of Technology Truman Bewley set out to conduct a handful of interviews with business executives to gain some theoretical inspiration, and his project blossomed into over 300 interviews with business people, labor leaders and consultants. He is truly the accidental interviewer of economics. Time and again, he found that workers behave like people, not atomistic, selfish economic agents. His insights will engage and enrage economic theorists and empiricists for years to come. -- Alan Krueger, Bendheim Professor of Economics and Public Affairs, Princeton University
Truman F. Bewley is Alfred Cowles Professor of Economics at Yale University.
In Why Wages Don't Fall During A Recession, [Truman Bewley] tackles
one of the oldest, and most controversial, puzzles in economics:
why nominal wages rarely fall (and real wages do not fall enough)
when unemployment is high. But he does so in a novel way, through
interviews with over 300 businessmen, union leaders, job recruiters
and unemployment counsellors in the north-eastern United States
during the early 1990s recession...Mr. Bewley concludes that
employers resist pay cuts largely because the savings from lower
wages are usually outweighed by the cost of denting workers'
morale: pay cuts hit workers‚ standard of living and lower their
self-esteem. Falling morale raises staff turnover and reduces
productivity...Mr. Bewley's theory has some interesting
implications...[and] has a ring of truth to it.
*The Economist*
This contribution to the growing literature on behavioral
macroeconomics threatens to disturb the tranquil state of
macroeconomic theory that has prevailed in recent years...Bewley's
argument will be hard for conventional macroeconomists to ignore,
partly because of the extraordinary thoroughness and honesty with
which he evidently conducted his investigation, and the sheer
volume of evidence he provides...Although Bewley's work will not
settle the substantive debates related to wage rigidity, it is
likely to have a profound influence on the way macroeconomists
construct models. In particular, the concepts of morale, fairness,
and money illusion are almost certain to play a big role in
macroeconomic theory. His demonstration that there exist in reality
simple, robust behavioral patters that cannot plausibly be founded
on traditional maximizing behabior also raises the prospect of a
more empirically oriented, more behavioral macroeconomics in the
future.
*Journal of Economic Literature*
I think any scholar interested in labour markets and wage
determination should read this well-written, lively, and highly
stimulating book...[It] provides a fresh view and a lot of
complementary background knowledge about how experienced people in
the field see the employment relationship and what is actually
crucial. Knowledge of this sort is all too rare in economics, and
Truman Bewley's truly impressive study can serve as a role model
for future investigations.
*Journal of Institutional and Theoretical Economics*
To call this book a breath of fresh air is an understatement. The
direct insights are fascinating, and Truman Bewley's use of them is
sharp and insightful. Labor economists and macroeconomists have a
lot to think about.
*Robert M. Solow, Nobel Laureate, Institute Professor of Economics,
Emeritus, Massachusetts Institute of Technology*
Truman Bewley set out to conduct a handful of interviews with
business executives to gain some theoretical inspiration, and his
project blossomed into over 300 interviews with business people,
labor leaders and consultants. He is truly the accidental
interviewer of economics. Time and again, he found that workers
behave like people, not atomistic, selfish economic agents. His
insights will engage and enrage economic theorists and empiricists
for years to come.
*Alan Krueger, Bendheim Professor of Economics and Public Affairs,
Princeton University*
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