According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker _____ increases.

Question

Quizplus · Accepted Answer

According to efficiency-wage theories, paying higher wages than the market equilibrium can increase worker productivity. This is because higher wages create a higher incentive for workers to perform well and avoid shirking on the job. Thus, firms benefit from paying higher wages as they can get more out of their workers.

According to Efficiency-Wage Theories, Firms Benefit by Paying Higher-Than-Equilibrium Wages