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Exploring the Effects of Unequal and Secretive Pay

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  • Sven Fischer

    ()
    (Max Planck Institute for Research on Collective Goods)

  • Eva-Maria Steiger

    ()
    (Stratigic Interaction Group, Max Planck Institute of Economics, Jena)

Abstract

We experimentally test whether intentional and observable discriminatory pay of symmetric agents in the Winter (2004) game causes low paid agents to reduce effiort. We control for intentionality of wages by either allowing a principal to determine wages or by implementing a random process. Our main observations are that discrimination has no negative effiect on effiorts and principals do not shy away from using discriminatory pay if it is observable. Rather, with experience discrimination enhances efficiency as it facilitates coordination among agents. The only evidence for reciprocity is that subjects receiving a low payment from a principal (discriminatory or not) exert signiï¬cantly less effort.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-107.

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Date of creation: 21 Dec 2009
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Handle: RePEc:jrp:jrpwrp:2009-107

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Keywords: wage discrimination; experimental study; envy; reciprocity; pay secrecy;

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References

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  1. Ernst Fehr & Lorenz Goette & Christian Zehnder, 2008. "A behavioral account of the labor market: the role of fairness concerns," IEW - Working Papers 394, Institute for Empirical Research in Economics - University of Zurich.
  2. Gary E Bolton & Jordi Brandts & Axel Ockenfels, 2005. "Fair Procedures: Evidence from Games Involving Lotteries," Economic Journal, Royal Economic Society, vol. 115(506), pages 1054-1076, October.
  3. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2009. "Homo Reciprocans: Survey Evidence on Behavioural Outcomes," Economic Journal, Royal Economic Society, vol. 119(536), pages 592-612, 03.
  4. Claudia Olivetti & Barbara Petrongolo, 2005. "Unequal Pay or Unequal Employment? A Cross-Country Analysis of Gender Gaps," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-003, Boston University - Department of Economics, revised Oct 2008.
  5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  6. Sebastian J. Goerg & Sebastian Kube & Ro'i Zultan, 2010. "Treating Equals Unequally: Incentives in Teams, Workers' Motivation, and Production Technology," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 747-772, October.
  7. Gary Charness & Peter Kuhn, 2007. "Does Pay Inequality Affect Worker Effort? Experimental Evidence," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 693-723.
  8. Eyal Winter, 2007. "Incentive Reversal," Levine's Working Paper Archive 843644000000000241, David K. Levine.
  9. Güth, Werner & Kocher, Martin G. & Popova, Vera, 2012. "Co-employment of permanently and temporarily employed agents," Munich Reprints in Economics 18169, University of Munich, Department of Economics.
  10. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  11. Eyal Winter, 2004. "Incentives and Discrimination," American Economic Review, American Economic Association, vol. 94(3), pages 764-773, June.
  12. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  13. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
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Cited by:
  1. Sebastian J. Goerg & Sebastian Kube & Ro'i Zultan, 2010. "Treating Equals Unequally: Incentives in Teams, Workers' Motivation, and Production Technology," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 747-772, October.
  2. Anat Bracha & Uri Gneezy, 2012. "Relative pay and labor supply," Working Papers 12-6, Federal Reserve Bank of Boston.
  3. Saima Naeem & Asad Zaman, 2013. "For Love or Money? Motivating Workers," PIDE-Working Papers 2013:90, Pakistan Institute of Development Economics.

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