Unfair Chances and Labor Supply

Abstract

We conduct an online experiment to study how the unfairness of chances leading to wage inequality affects workers' labor supply decisions. In line with existing research, we find that, at a given wage, disadvantageous wage inequality reduces labor supply. However, surprisingly, whether this inequality stems from fair or unfair chances does not matter. That is, a procedure with fair chances does not compensate for wage inequality. Our results in a work setting stand in stark contrast to prior empirical evidence showing that individuals care about fair chances when making redistribution decisions. 

Keywords: Unfair Chances, Labor Supply, Workplace Inequality, Experiment