Download This PaperDoes Pay Inequality Affect Worker Effort? Experimental Evidence
40 Pages Posted: 2 Mar 2004
Date Written: December 15, 2006
Abstract
We study worker behavior in an efficiency-wage environment where co-workers' wages can influence a worker's effort. Theoretically, we show that an increase in workers' responsiveness to co-workers' wages should lead profit-maximizing firms to compress wages. Our laboratory experiments, on the other hand, show that - while workers' effort choices are highly sensitive to their own wages - effort is not affected by co-workers' wages. This casts doubt on the notion that workers' concerns with equity might explain pay policies such as wage compression, or wage secrecy.
Keywords: Wage compression, wage secrecy, wage inequality, experiment, gift exchange
JEL Classification: A13, B49, C91, J31, J41
Suggested Citation: Suggested Citation
IZA Institute of Labor Economics
P.O. Box 7240
Bonn, D-53072
Germany
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
A Theory of Fairness, Competition and Cooperation
By Ernst Fehr
-
Understanding Social Preference with Simple Tests
By Gary Charness and Matthew Rabin
-
By Armin Falk and Urs Fischbacher
-
By Armin Falk and Urs Fischbacher
-
A Shred of Evidence on Theories of Wage Stickiness
By Alan S. Blinder and Don Choi
-
A Simple Mechanism for the Efficient Provision of Public Goods - Experimental Evidence
By Josef Falkinger, Ernst Fehr, ...
-
On the Nature of Fair Behavior
By Armin Falk, Ernst Fehr, ...
-
On the Nature of Fair Behavior
By Armin Falk, Ernst Fehr, ...