On the Relevance and Composition of Gifts within the Firm: Evidence from Field Experiments

CIRPEE Working Paper 09-32

41 Pages Posted: 14 Aug 2009

See all articles by Charles Bellemare

Charles Bellemare

Université Laval - Département d'Économique; Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE); IZA Institute of Labor Economics

Bruce Shearer

Université Laval - Département d'Économique; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: August 13, 2009

Abstract

We investigate the economic relevance and the composition of gifts within a firm where output is contractible. We develop a structural econometric model that identifies workers’ optimal reaction to monetary gifts received from their employer. We estimate the model using data from two separate field experiments, both conducted within a tree-planting firm. We use the estimated structural parameters to generalize beyond the experiment, simulating how workers would react to different gifts on the part of the firm, within different labour-market settings. We find that gifts have a role to play within this firm, increasing in importance when the workers’ outside alternatives deteriorate. Profit-maximizing gifts would increase profits within slack labour markets by up to 10% on average and by up to 17% for certain types of workers. These gifts represent significant increases in worker earnings; the average gift paid to workers attains 22% of average expected earnings in the absence of gifts. We find that gifts should be given by setting piece-rates above the market-clearing level rather than through fixed wages.

Keywords: gift giving, structural models, field experiments

JEL Classification: J33, M52, C93

Suggested Citation

Bellemare, Charles and Shearer, Bruce, On the Relevance and Composition of Gifts within the Firm: Evidence from Field Experiments (August 13, 2009). CIRPEE Working Paper 09-32, Available at SSRN: https://ssrn.com/abstract=1448617 or http://dx.doi.org/10.2139/ssrn.1448617

Charles Bellemare (Contact Author)

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE)

Pavillon De Sève
Ste-Foy, Quebec G1K 7P4
Canada

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Bruce Shearer

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada
418-656-2131 (Phone)
418-656-7798 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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