Measuring Effort

Efficiency‐wage theory has been criticized recently for its treatment of “effort”. According to Currie and Steedman (Metroeconomica, 1993), effort is an ordinal variable, and ordinality implies that some standard assumptions become meaningless. This criticism is unfounded. The numerical representation of effort must be consistent with the specifications of the production function and workers' preferences. As long as this requirement is met, the results of the analysis are independent of the choice of representation.