Neoclassical economic theorys assumption of a strictly utility of money maximizing economic actor has been unable to explain such economic phenomena as involuntary unemployment and above market clearing wages. Efficiency wage theory, in its various forms, has provided some explanation for these labour market features. Akerlofs (1982) Fair Wage-Effort Hypothesis or Partial Gift Exchange model of the labour market explains involuntary unemployment through the productivity enhancing effects of higher wages. In Akerlofs model this is done through a sort of unspoken gift exchange in which higher wages given to the workers are returned to the firm in the form of higher effort or productivity. <p>The Partial Gift Exchange model can also be modeled in a laboratory setting where its various predictions and assumptions can be tested. This has been done by a number of researchers over the last 15 years, who have generally found support for the validity of the theory using a one sided oral auction procedure. This thesis seeks to conduct a similar experiment, but in the form of a survey, the focus of which is the relationship between wages and effort. <p>A number of the results of previous experiments supporting the Fair Wage-Effort Hypothesis have also been generated in the survey, for example a positive relationship between wages and effort. New and interesting findings not previously examined in the lab or not present in previous experiment were also present in the survey: the negative effect of wage inequity; a positive coefficient for the gender dummy variable; and the negative effect of unemployment insurance. <p>The survey has produced some new and interesting results, transporting the survey back into the laboratory setting from which it was inspired would provide an interesting comparison.

Neoclassical economic theorys assumption of a strictly utility of money maximizing economic actor has been unable to explain such economic phenomena as involuntary unemployment and above market clearing wages. Efficiency wage theory, in its various forms, has provided some explanation for these labour market features. Akerlofs (1982) Fair Wage-Effort Hypothesis or Partial Gift Exchange model of the labour market explains involuntary unemployment through the productivity enhancing effects of higher wages. In Akerlofs model this is done through a sort of unspoken gift exchange in which higher wages given to the workers are returned to the firm in the form of higher effort or productivity. <p>The Partial Gift Exchange model can also be modeled in a laboratory setting where its various predictions and assumptions can be tested. This has been done by a number of researchers over the last 15 years, who have generally found support for the validity of the theory using a one sided oral auction procedure. This thesis seeks to conduct a similar experiment, but in the form of a survey, the focus of which is the relationship between wages and effort. <p>A number of the results of previous experiments supporting the Fair Wage-Effort Hypothesis have also been generated in the survey, for example a positive relationship between wages and effort. New and interesting findings not previously examined in the lab or not present in previous experiment were also present in the survey: the negative effect of wage inequity; a positive coefficient for the gender dummy variable; and the negative effect of unemployment insurance. <p>The survey has produced some new and interesting results, transporting the survey back into the laboratory setting from which it was inspired would provide an interesting comparison.

Using theoretical and empirical approaches, this thesis asks whether skilled and unskilled labour complement or substitute one another in production. We primarily investigate whether an increase in the proportion of workers with skills would raise or lower demand for those who remain unskilled. A secondary issue is the role of factor prices in labour demand. To study the role of factor prices, we estimate labour demand elasticities and Alien elasticities of substitution between capital and up to five occupations in South Africa. We supplement firmlevel data with household survey information and confirm theoretically that the elasticities can be estimated from a cost function under non-constant returns to scale. We show that separable disaggregated inputs can be used to find aggregate elasticities: more skilled and less skilled aggregates are p-complements, so a fall in skilled wages would lead to a rise in demand for less skilled labour. Disaggregated estimates suggest unskilled workers are p-complements with semi-skilled workers but p-substitutes with skilled/artisanal labour. We investigate the effects of a rise in skill supply on the relatively unskilled by estimating Hicks elasticities of complementarity and factor price. Aggregated estimates suggest more skilled and less skilled labour are q-complements, so an exogenous rise in the supply of skilled labour would raise demand for less skilled labour. Disaggregated estimates suggest skilled/artisanal and unskilled labour are q-complements while semi-skilled and unskilled labour are q-substitutes. The results allow for imperfectly elastic product demand and rigid wages. Using an endogenous growth model, we show technological progress is skill-biased in the South if it is in the North, resulting in rising wage inequality in developing countries. Assuming skilled and unskilled labour are perfect substitutes, we model expanded educational access as it adds relatively educated cohorts to the labour market. A rising skill composition causes accelerated skill-biased technological change and wage inequality. Relaxing the assumption of perfect substitutability, a one-off rise in skill supply only raises wage inequality if the elasticity of substitution is high, higher than existing empirical estimates.

The overriding theme of my dissertation is the use of short-term weather fluctuations to study how people allocate their time across activities. In Chapter 1, a theoretical model is developed to distinguish malfeasant from legitimate forms of employee sickness absenteeism. In this model, individuals' marginal utility of indoor leisure is increasing in their sickness levels, while their marginal utility of outdoor leisure is an increasing function of the interaction of their health and the quality of outdoor weather. In equilibrium, sickness absenteeism occurs at both ends of the sickness distribution -- among the relatively sick and among the most healthy facing the best weather. The positive relation between marginal changes in weather quality and levels of sickness absenteeism in the workplace reflects the substitution of the inframarginal employees who are the least sick away from work activities towards outdoor leisure activities. The model in Chapter 1 suggests an empirical strategy to identify a shirking component in overall reported sickness absenteeism. Not only does this approach avoid attributing entirely legitimate forms of absenteeism to shirking, but unlike previous studies using employee dismissal rates, it is able to distinguish shirking activity whether or not that activity is detected by employers. In order to exploit exogenous weather fluctuations to identify shirking activity, we need a one-dimensional measure of weather “quality”. The primary objective of Chapter 2 is to construct a weather quality index that captures the influence of the weather on workers' preferences for outdoor leisure activity. The weather quality index takes into account the multifaceted nature of weather conditions, and measures how various weather elements -- temperature, humidity, precipitation, wind speed, and cloud cover -- come together to affect the propensity of employees to engage in high-utility outdoor recreational activities. The resulting index provides a ranking of different weather conditions in terms of their outdoor recreational values, which can then be used to capture the incentives of employees to shirk contractual work hours in response to purely exogenous weather changes. Chapter 3 empirically tests the existence of weather-induced substitution between work and outdoor leisure activities and examines how this type of behaviour varies across workers facing different shirking incentives. Linking 12 years of employee data from Canada's monthly Labour Force Survey (LFS), which queries reasons for employees' absences, to weather quality measured using the index constructed in Chapter 2, a clear positive relationship is found between the quality of outside weather conditions and short-term reported sickness absenteeism. Moreover, consistent with a key proposition of the theoretical model in Chapter 1, the empirical relation between weather and sickness absenteeism tends to be larger when existing shirking incentives are low, such as when sick pay is less generous and when probability of getting fired if caught shirking is high. There is, however, little evidence that firms are able to adjust shirking incentives through the payment of efficiency wages. Finally, Chapter 4 examines another type of substitution induced by weather shocks -- the substitution between outdoor and indoor physical activities. The Chapter begins with a theoretical model of the decision to participate in physical activities, which assumes that when adverse weather shocks deter outdoor physical activities, indoor physical activities are the only viable option for individuals to stay physically active. However, because the indoor options are more costly, substituting from outdoor to indoor physical activities is easier for higher-income individuals. This suggests an explanation for the stylized fact that rates of physical activity participation are low among lower socioeconomic groups. Linking time-use data from Canadian General Social Survey with archival weather data, the results of the empirical analysis in this chapter provides evidence of a positive income effect enabling substitution from outdoor to indoor physical activities when outside weather is not conducive for participating in outdoor activities. By exploiting the role that income plays in maintaining physical activity levels when less costly outdoor options are limited, this chapter formally illustrates a credible causal link between people's income levels and their participation in leisure time physical activities and provides direct evidence of this link. The results have important policy implications for promoting physical activities, especially among lower income population.

The overriding theme of my dissertation is the use of short-term weather fluctuations to study how people allocate their time across activities. In Chapter 1, a theoretical model is developed to distinguish malfeasant from legitimate forms of employee sickness absenteeism. In this model, individuals' marginal utility of indoor leisure is increasing in their sickness levels, while their marginal utility of outdoor leisure is an increasing function of the interaction of their health and the quality of outdoor weather. In equilibrium, sickness absenteeism occurs at both ends of the sickness distribution -- among the relatively sick and among the most healthy facing the best weather. The positive relation between marginal changes in weather quality and levels of sickness absenteeism in the workplace reflects the substitution of the inframarginal employees who are the least sick away from work activities towards outdoor leisure activities. The model in Chapter 1 suggests an empirical strategy to identify a shirking component in overall reported sickness absenteeism. Not only does this approach avoid attributing entirely legitimate forms of absenteeism to shirking, but unlike previous studies using employee dismissal rates, it is able to distinguish shirking activity whether or not that activity is detected by employers. In order to exploit exogenous weather fluctuations to identify shirking activity, we need a one-dimensional measure of weather “quality”. The primary objective of Chapter 2 is to construct a weather quality index that captures the influence of the weather on workers' preferences for outdoor leisure activity. The weather quality index takes into account the multifaceted nature of weather conditions, and measures how various weather elements -- temperature, humidity, precipitation, wind speed, and cloud cover -- come together to affect the propensity of employees to engage in high-utility outdoor recreational activities. The resulting index provides a ranking of different weather conditions in terms of their outdoor recreational values, which can then be used to capture the incentives of employees to shirk contractual work hours in response to purely exogenous weather changes. Chapter 3 empirically tests the existence of weather-induced substitution between work and outdoor leisure activities and examines how this type of behaviour varies across workers facing different shirking incentives. Linking 12 years of employee data from Canada's monthly Labour Force Survey (LFS), which queries reasons for employees' absences, to weather quality measured using the index constructed in Chapter 2, a clear positive relationship is found between the quality of outside weather conditions and short-term reported sickness absenteeism. Moreover, consistent with a key proposition of the theoretical model in Chapter 1, the empirical relation between weather and sickness absenteeism tends to be larger when existing shirking incentives are low, such as when sick pay is less generous and when probability of getting fired if caught shirking is high. There is, however, little evidence that firms are able to adjust shirking incentives through the payment of efficiency wages. Finally, Chapter 4 examines another type of substitution induced by weather shocks -- the substitution between outdoor and indoor physical activities. The Chapter begins with a theoretical model of the decision to participate in physical activities, which assumes that when adverse weather shocks deter outdoor physical activities, indoor physical activities are the only viable option for individuals to stay physically active. However, because the indoor options are more costly, substituting from outdoor to indoor physical activities is easier for higher-income individuals. This suggests an explanation for the stylized fact that rates of physical activity participation are low among lower socioeconomic groups. Linking time-use data from Canadian General Social Survey with archival weather data, the results of the empirical analysis in this chapter provides evidence of a positive income effect enabling substitution from outdoor to indoor physical activities when outside weather is not conducive for participating in outdoor activities. By exploiting the role that income plays in maintaining physical activity levels when less costly outdoor options are limited, this chapter formally illustrates a credible causal link between people's income levels and their participation in leisure time physical activities and provides direct evidence of this link. The results have important policy implications for promoting physical activities, especially among lower income population.