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Gift Exchange in the Workplace

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  • Robert Dur

    ()
    (Erasmus University Rotterdam, and CESifo)

Abstract

We develop a model of manager-employee relationships where employees care more for their manager when they are more convinced that their manager cares for them. Managers can signal their altruistic feelings towards their employees in two ways: by offering a generous wage and by giving attention. Contrary to the traditional gift-exchange hypothesis, we show that altruistic managers may offer lower wages and nevertheless build up better social-exchange relationships with their employees than egoistic managers do. In such equilibria, a low wage signals to employees that the manager has something else to offer -- namely, a lot of attention -- which will induce the employee to stay at the firm and work hard. Our predictions are well in line with some recent empirical findings about gift exchange in the field.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-082/1.

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Date of creation: 03 Sep 2008
Date of revision:
Handle: RePEc:dgr:uvatin:20080082

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

Related research

Keywords: manager-employee relationships; wages; extra-role behavior; sabotage; gift exchange; social exchange; conditional altruism; reciprocity; signaling game;

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References

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  1. Ellingsen, Tore & Johannesson, Magnus, 2006. "Pride and Prejudice: The Human Side of Incentive Theory," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5768, C.E.P.R. Discussion Papers.
  2. Sebastian Kube & Michel André Maréchal & Clemens Puppe, 2010. "The currency of reciprocity - gift-exchange in the workplace," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 377, Institute for Empirical Research in Economics - University of Zurich, revised Aug 2011.
  3. Hennig-Schmidt, Heike & Rockenbach, Bettina & Sadrieh, Abdolkarim, 2008. "In Search of Workers' Real Effort Reciprocity - A Field and a Laboratory Experiment," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 238, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Ernst Fehr & Simon G�chter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 14(3), pages 159-181, Summer.
  5. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(2), pages 437-59, May.
  6. Campbell, Carl M, III & Kamlani, Kunal S, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(3), pages 759-89, August.
  7. Uri Gneezy & John A List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," Econometrica, Econometric Society, Econometric Society, vol. 74(5), pages 1365-1384, 09.
  8. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
  9. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, Elsevier, vol. 45(10), pages 1793-1810, December.
  10. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July.
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Cited by:
  1. Susanne Neckermann & Reto Cueni & Bruno S. Frey, 2009. "Awards At Work," CREMA Working Paper Series, Center for Research in Economics, Management and the Arts (CREMA) 2009-09, Center for Research in Economics, Management and the Arts (CREMA).
  2. Bruno S. Frey & Susanne Neckermann, 2009. "Academics Appreciate Awards - A New Aspect of Incentives in Research," CESifo Working Paper Series 2531, CESifo Group Munich.

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