IDEAS home Printed from https://ideas.repec.org/p/ajk/ajkdps/105.html
   My bibliography  Save this paper

Do Workers Benefit from Wage Transparency Rules?

Author

Listed:
  • Oliver Gürtler

    (University of Cologne)

  • Lennart Struth

    (University of Cologne)

Abstract

Wage transparency rules arguably enable workers better to assess their contribution to firm value, allowing them to make wage demands that more accurately reflect their value for the employing firm and to lower wage gaps in turn. This paper contains a formal analysis of transparency rules and their effects on wages. We find that these rules induce firms to behave strategically with the aim of manipulating the information workers receive. We identify a large class of rules that yield an identical equilibrium outcome. For productivity distributions with decreasing (increasing) hazard rate, transparency rules increase (potentially decrease) workers' payoff.

Suggested Citation

  • Oliver Gürtler & Lennart Struth, 2021. "Do Workers Benefit from Wage Transparency Rules?," ECONtribute Discussion Papers Series 105, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:105
    as

    Download full text from publisher

    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_105_2021.pdf
    File Function: First version, 2021
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Moro, Andrea & Norman, Peter, 2003. "Affirmative action in a competitive economy," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 567-594, March.
    2. Christopher Avery & Susan Athey & Peter Zemsky, 2000. "Mentoring and Diversity," American Economic Review, American Economic Association, vol. 90(4), pages 765-786, September.
    3. David Bjerk, 2008. "Glass Ceilings or Sticky Floors? Statistical Discrimination in a Dynamic Model of Hiring and Promotion," Economic Journal, Royal Economic Society, vol. 118(530), pages 961-982, July.
    4. J. Aislinn Bohren & Kareem Haggag & Alex Imas & Devin G. Pope, 2019. "Inaccurate Statistical Discrimination: An Identification Problem," PIER Working Paper Archive 19-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 17 Jul 2020.
    5. Walter Y. Oi & Todd L. Idson, 1999. "Workers Are More Productive in Large Firms," American Economic Review, American Economic Association, vol. 89(2), pages 104-108, May.
    6. Dan Bernhardt, 1995. "Strategic Promotion and Compensation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(2), pages 315-339.
    7. Michael Waldman & Ori Zax, 2020. "Promotion Signaling and Human Capital Investments," American Economic Journal: Microeconomics, American Economic Association, vol. 12(1), pages 125-155, February.
    8. Jed DeVaro & Antti Kauhanen, 2016. "An “Opposing Responses” Test of Classic versus Market-Based Promotion Tournaments," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 747-779.
    9. repec:eee:labchp:v:3:y:1999:i:pb:p:2165-2214 is not listed on IDEAS
    10. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214, Elsevier.
    11. Francine D. Blau & Lawrence M. Kahn, 2017. "The Gender Wage Gap: Extent, Trends, and Explanations," Journal of Economic Literature, American Economic Association, vol. 55(3), pages 789-865, September.
    12. Zoe B. Cullen & Bobak Pakzad-Hurson, 2021. "Equilibrium Effects of Pay Transparency," NBER Working Papers 28903, National Bureau of Economic Research, Inc.
    13. Werner, Peter, 2023. "Wage negotiations and strategic responses to transparency," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 161-175.
    14. Caliendo, Marco & Lee, Wang-Sheng & Mahlstedt, Robert, 2017. "The gender wage gap and the role of reservation wages: New evidence for unemployed workers," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 161-173.
    15. Hideo Owan, 2004. "Promotion, Turnover, Earnings, and Firm-Sponsored Training," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 955-978, October.
    16. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.
    17. Waldman, Michael, 2013. "Classic promotion tournaments versus market-based tournaments," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 198-210.
    18. J. Aislinn Bohren & Alex Imas & Michael Rosenberg, 2019. "The Dynamics of Discrimination: Theory and Evidence," American Economic Review, American Economic Association, vol. 109(10), pages 3395-3436, October.
    19. Paul Milgrom & Sharon Oster, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(3), pages 453-476.
    20. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    21. Suman Ghosh & Michael Waldman, 2010. "Standard promotion practices versus up‐or‐out contracts," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 301-325, June.
    22. David Bjerk, 2008. "Glass Ceilings or Sticky Floors? Statistical Discrimination in a Dynamic Model of Hiring and Promotion," Economic Journal, Royal Economic Society, vol. 118(530), pages 961-982, July.
    23. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    24. Brown, Sarah & Roberts, Jennifer & Taylor, Karl, 2011. "The gender reservation wage gap: Evidence from British Panel data," Economics Letters, Elsevier, vol. 113(1), pages 88-91, October.
    25. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    26. Fryer, Roland Jr., 2007. "Belief flipping in a dynamic model of statistical discrimination," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1151-1166, June.
    27. Bilal Muhammad Khan & Muhammad Farhan Majid, 2020. "A note on the gender reservation wage gap in developing countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(5), pages 462-468, November.
    28. Greiner, Ben & Ockenfels, Axel & Werner, Peter, 2011. "Wage transparency and performance: A real-effort experiment," Economics Letters, Elsevier, vol. 111(3), pages 236-238, June.
    29. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-333, April.
    30. Emre Ekinci & Antti Kauhanen & Michael Waldman, 2019. "Bonuses and Promotion Tournaments: Theory and Evidence," The Economic Journal, Royal Economic Society, vol. 129(622), pages 2342-2389.
    31. Waldman, Michael, 2016. "The dual avenues of labor market signaling," Labour Economics, Elsevier, vol. 41(C), pages 120-134.
    32. Suzanne H. Bijkerk & Silvia Dominguez-Martinez & Jurjen Kamphorst & Otto H. Swank, 2021. "Labor Market Quotas When Promotions Are Signals," Journal of Labor Economics, University of Chicago Press, vol. 39(2), pages 437-460.
    33. Jan Zábojník & Dan Bernhardt, 2001. "Corporate Tournaments, Human Capital Acquisition, and the Firm Size—Wage Relation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 693-716.
    34. Fryer, Roland, 2007. "Belief Flipping in a Dynamic Model of Statistical Discrimination," Scholarly Articles 2955768, Harvard University Department of Economics.
    35. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    36. Khan, Bilal Muhammad & Majid, Muhammad Farhan, 2018. "Gender Reservation Wage Gap in Developing Countries," MPRA Paper 92177, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jed DeVaro & Suman Ghosh & Cindy Zoghi, 2018. "Job Characteristics and Labor Market Discrimination in Promotions," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(3), pages 389-434, July.
    2. Cassidy, Hugh & DeVaro, Jed & Kauhanen, Antti, 2016. "Promotion signaling, gender, and turnover: New theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 140-166.
    3. Dato, Simon & Grunewald, Andreas & Kräkel, Matthias & Müller, Daniel, 2016. "Asymmetric employer information, promotions, and the wage policy of firms," Games and Economic Behavior, Elsevier, vol. 100(C), pages 273-300.
    4. Marc Gürtler & Oliver Gürtler, 2019. "Promotion signaling, discrimination, and positive discrimination policies," RAND Journal of Economics, RAND Corporation, vol. 50(4), pages 1004-1027, December.
    5. Ekinci, Emre, 2022. "Employee entrepreneurship and signaling role of corporate venturing decisions," Labour Economics, Elsevier, vol. 79(C).
    6. Bastani, Spencer & Giebe, Thomas & Gürtler, Oliver, 2022. "Simple equilibria in general contests," Games and Economic Behavior, Elsevier, vol. 134(C), pages 264-280.
    7. Ori Zax, 2020. "Human capital acquisition as a competitive response to the promotion distortion," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 496-509, July.
    8. Dickmanns, Lisa & Gürtler, Marc & Gürtler, Oliver, 2018. "Market-based tournaments: An experimental investigation," Labour Economics, Elsevier, vol. 51(C), pages 294-306.
    9. Chen Cohen & Ori Zax, 2022. "Human capital acquisition as a signaling device in promotion competition," Metroeconomica, Wiley Blackwell, vol. 73(2), pages 550-566, May.
    10. Jed DeVaro & Oliver Gürtler, 2020. "Strategic shirking in competitive labor markets: A general model of multi‐task promotion tournaments with employer learning," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(2), pages 335-376, April.
    11. Deutscher, Christian & Gürtler, Marc & Gürtler, Oliver & DeVaro, Jed, 2020. "Firm choice and career success - theory and evidence," European Economic Review, Elsevier, vol. 127(C).
    12. Jin, Xin, 2014. "The Signaling Role of Note Being Promoted: Theory and Evidence," MPRA Paper 58484, University Library of Munich, Germany.
    13. Michael Waldman & Ori Zax, 2016. "An Exploration of the Promotion Signaling Distortion," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(1), pages 119-149.
    14. DeVaro, Jed, 2011. "Using "opposing responses" and relative performance to distinguish empirically among alternative models of promotions," MPRA Paper 35175, University Library of Munich, Germany.
    15. Spencer Bastani & Thomas Giebe & Oliver Gürtler, 2023. "Overconfidence and Gender Equality in the Labor Market," ECONtribute Discussion Papers Series 220, University of Bonn and University of Cologne, Germany.
    16. Kato, Takao & Ogawa, Hiromasa & Owan, Hideo, 2016. "Working Hours, Promotion and the Gender Gap in the Workplace," IZA Discussion Papers 10454, Institute of Labor Economics (IZA).
    17. Lennart Struth & Max Thon, 2022. "Discrimination, Quotas, and Stereotypes," ECONtribute Discussion Papers Series 188, University of Bonn and University of Cologne, Germany.
    18. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.
    19. Lehmann, Jee-Yeon, 2011. "Job assignment and promotion under statistical discrimination: evidence from the early careers of lawyers," MPRA Paper 33466, University Library of Munich, Germany.
    20. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.

    More about this item

    Keywords

    Wage-setting; transparency rule; payoff; strategic effect; learning effect;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ajk:ajkdps:105. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ECONtribute Office (email available below). General contact details of provider: https://www.econtribute.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.