The Shapiro-Stiglitz model is an economic model that seeks to explain the relationship between wages and productivity. It is named after economists Carl Shapiro and Joseph Stiglitz, who developed the model in the 1980s.
According to the Shapiro-Stiglitz model, wages are determined by both the productivity of workers and the bargaining power of employers. This means that higher productivity levels should lead to higher wages, but that workers' bargaining power also plays a role in determining the final wage rate.
The model also suggests that employers have some control over the productivity of their workers, through investment in training, education, and other forms of human capital development. However, the level of investment in human capital may be influenced by the bargaining power of workers.
Overall, the Shapiro-Stiglitz model provides a useful framework for understanding the complex factors that influence wage levels in an economy. It highlights the importance of both productivity and bargaining power in determining wages, and shows how employers can influence workers' productivity levels through their investment in human capital.
The Shapiro Stiglitz Model
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