Worker Characteristics and Wage Differentials: Evidence from a Gift-Exchange Experiment

51 Pages Posted: 17 Nov 2011

See all articles by Florian Englmaier

Florian Englmaier

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Sebastian Strasser

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Joachim K. Winter

Ludwig Maximilian University of Munich (LMU); CESifo (Center for Economic Studies and Ifo Institute); Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA); Deutsche Bundesbank - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: November 17, 2011

Abstract

There is ample empirical evidence indicating that a substantial fraction of the population exhibits social preferences. Recent work also shows that social preferences influence the effectiveness of incentives in labor relations. Hence when making contracting decisions, employers should take into account that workers are heterogenous with respect to both their productivity and their social preferences. This paper presents causal evidence that they do. In a real-effort experiment, we elicit measures of workers’ productivity and trustworthiness and make this information available to potential employers. Our data show that employers pay significant wage premia for both traits. Firms make highest profits with trustworthy workers, in particular with highly productive and trustworthy workers. We also document differences in the strength of gift exchange across worker types. In particular, output and profit levels of trustworthy workers are less dispersed than those of not-trustworthy workers.

Keywords: information, skills, laboratory experiments, gift exchange games, optimal contracts

JEL Classification: C91, J41, D86

Suggested Citation

Englmaier, Florian and Strasser, Sebastian and Winter, Joachim K., Worker Characteristics and Wage Differentials: Evidence from a Gift-Exchange Experiment (November 17, 2011). CESifo Working Paper Series No. 3637, Available at SSRN: https://ssrn.com/abstract=1961036 or http://dx.doi.org/10.2139/ssrn.1961036

Florian Englmaier (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28 III/ VG
D-80539 Munich
Germany

Sebastian Strasser

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Joachim K. Winter

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

Deutsche Bundesbank - Research Department ( email )

PO Box 10 06 02
D60006 Frankfurt
Germany

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