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A Simple Test of the Nutrition-Based Efficiency Wage Model
Working paper
Anand Swamy
August 1993 |
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Among the several variants of efficiency wage models, one has been considered especially relevant for developing countries; the nutrition-based efficiency wage model. This model was first proposed by Liebenstein (1957) and Mazumdar (1959).
Any model of equilibrium involuntary unemployment has to address the following questlon: What prevents unemployed workers from obtaning employment by bidding down the wage? According to the nutrition-based efficiency wage model (EWM), employers do not lower Ihe wage because the worker would then consume less, thereby lowering his productivity; paying a lower wage may raise the cost per efficiency unit of labor. Thus, the wage will not be lowered because “cheap labor is dear labor.”
This explanation for wage rigidity has been very difficult to test. It has been widely discussed, but the approaches taken thus far have been indirect and do not evaluate the fundamental premise of the model: Is cheap labor really dear labor? Is it true that cutting the wage will raise the cost per efficiency unit of labor? Until recently, the lack of good evidence regarding the strength of the relationship between productivity and nutrition prevented examination of this issue. Recent work by several different authors has provided good estimates of the impact of calorie consumption on worker productivity. |
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| Last updated on: 12/19/2006 |
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