A survey of 184 firms was conducted to mvestIgate the reasons for wage ngidity The strongest support was found for explanations based on adverse selection in quits and on the effect of wages on effort. In addition, survey respondents mdicated that reducmg turnover IS an Important explanation of wage ngIdIty for wrute-collar workers, and that implicIt contracts are an important explanation for other workers. Respondents also belIeved that effort responds more strongly to wage decreases than to wage mcreases and that wage decreases have a greater Impact on the effort of low-skIlled workers than of hIgh-skIlled workers.

This study tests the efficiency wage hypothesIs by estimating wage and quit equations with data from the Employment Opportunity Pilot Project survey of firms. An efficiency wage model is derived that predicts effects of turnover costs and unemployment on wages as functions of first and second derivatives from the quit equation. The model is tested by examining the relationships between the coefficients in the wage and quit equations; the results are generally favorable to efficiency wage theory. Other Important findings are that firm characteristics raising workers' productivity tend to raise wages and that a rise in turnover costs reduces quits.

This study estimates wage equations with data disaggregated by occupation and union status, and it derives two measures of wage rigidity for each group of workers: the sensitivity of wages to unemployment and the speed with which wages respond to price inflation. The sensitivity of wages to an aggregate measure of unemployment was found to depend negatively on an occupation's skill level. In addition, union wages were more sensitive to unemployment than non‐union wages and responded less rapidly to price inflation.