One of the more troubling aspects of the ferment in macroeconomics that followed the demise of the Keynesian dominance in the late 1960s has been the inability of many of the new ideas to account for unemployment remains unexplained because equilibrium in most economic models occurs with supply equal to demand: if this equality holds in the labor market, there is no involuntary unemployment. Efficiency Wage Models of the Labor Market explores the reasons why there are labor market equilibria with employers preferring to pay wages in excess of the market-clearing wage and thereby explains involuntary unemployment. This volume brings together a number of the important articles on efficiency wage theory. The collection is preceded by a strong, integrative introduction, written by the editors, in which the hypothesis is set out and the variations, as described in subsequent chapters, are discussed.

Acknowledgments for reprinted articles; 1. Introduction George A. Akerlof and Janet L. Yellen; 2. The theory of underemployment in densely populated backward areas Harvey Leibenstein; 3. Another possible source of wage stickiness Robert M. Solow; 4. Equilibrium unemployment as a worker discipline device Carl Shapiro and Joseph E. Stiglitz; 5. Involuntary unemployment as a principal-agent equilibrium James E. Foster and Henry Y. Wan, Jr.; 6. Labor contracts as partial gift enchange George A. Akerlof; 7. A model of the natural rate of unemployment Steven C. Salop; 8. Job queues and layoffs in labor markets with flexible wages Andrew Weiss; 9. Hierarchy, ability, and income distribution Guillermo A. Calvo and Stanislaw Wellizs; 10. Incentives, productivity, and labor contracts Edward P. Lazear and Robert L. Moore; 11. Work incentives, hierarchy, and internal labor markets James M. Malcomson.