When 3+1 > 4: Gift Structure and Reciprocity in the Field
Duncan S. Gilchrist
Harvard University - Department of Economics; Harvard Business School
Harvard Business School - Negotiations, Organizations & Markets Unit
Deepak K. Malhotra
Harvard Business School - Negotiation, Organizations & Markets Unit
November 5, 2014
Harvard Business School NOM Unit Working Paper No. 14-030
Do higher wages elicit reciprocity and lead to increased productivity? In a field experiment with 266 employees, we find that paying above-market wages, per se, does not have an effect on productivity relative to paying market wages (in a context with no future employment opportunities). However, structuring a portion of the wage as a clear and unexpected gift — by offering a raise (with no additional conditions) after the employee has accepted the contract ― does lead to higher productivity for the duration of the job. Targeted gifts are more efficient than hiring more workers. However, the mechanism underlying our effect makes this unlikely to explain persistent above-market wages.
Number of Pages in PDF File: 27working papers series
Date posted: September 27, 2013 ; Last revised: November 8, 2014
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