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Gift Exchange and the Separation of Ownership and Control

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  • Sandra Maximiano

    ()
    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

  • Randolph Sloof

    ()
    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

  • Joep Sonnemans

    ()
    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

Abstract

Numerous gift exchange experiments have found a positive relationship between employers' wage offers and workers' effort levels. In (almost) all these experiments the employer both owns and controls the firm. Yet in reality many firms are characterized by the separation of ownership and control. In this paper we explore to what extent this affects the wage-effort relationship observed. We compare the standard bilateral gift exchange game between an owner-manager and a worker with two trilateral ones where the firm is owned by a shareholder and controlled by a manager. The wage-effort relationship we observe is the same in all three situations. Most strikingly, workers still reward higher wages with higher effort levels, even when the manager responsible for choosing the wage does not share in the firm's profits at all. The results of a fourth treatment in which the wage is exogenously given suggest that workers feel reciprocal towards the firm as a whole; both ownership and control are important for the gift exchange relationship.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-037/1.

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Date of creation: 06 Apr 2006
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Handle: RePEc:dgr:uvatin:20060037

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Web page: http://www.tinbergen.nl

Related research

Keywords: Gift exchange; multi-level hierarchy; reciprocity; experimental economics;

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References

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Cited by:
  1. Liang, Pinghan & Meng, Juanjuan, 2013. "Love me, love my dog: an experimental study on social connections and indirect reciprocity," MPRA Paper 45270, University Library of Munich, Germany.
  2. Casoria, Fortuna & Riedl, Arno, 2012. "Experimental Labor Markets and Policy Considerations: Incomplete Contracts and Macroeconomic Aspects," IZA Discussion Papers 7102, Institute for the Study of Labor (IZA).
  3. Robert Dur & Hein Roelfsema, 2007. "Social Exchange and Common Agency in Organizations," CESifo Working Paper Series 2030, CESifo Group Munich.

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