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Are efficiency wages equality wages? Exogenously induced fairness norms in working environments

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  • Gary Bolton
  • Peter Werner

Abstract

We investigate how the introduction of a salient norm for pay differentiation influences wage offers and effort exertion in a gift exchange experiment. Exogenously induced claims indeed lead to substantial differentiation in wages. At the same time, unequal wage schemes do not crowd out effort exertion. In particular, we do not observe strong detrimental effects resulting from disadvantageous relative wage positions. Finally, we find that specific communication patterns have a significant impact on effort exertion.

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Bibliographic Info

Paper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 56.

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Date of creation: 03 Aug 2012
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Handle: RePEc:kls:series:0056

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Keywords: Communication; entitlements; fairness norms; gift exchange; relative wages;

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  1. Rankin, Frederick W., 2006. "Requests and social distance in dictator games," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 27-36, May.
  2. Sliwka, Dirk, 2006. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," IZA Discussion Papers 2293, Institute for the Study of Labor (IZA).
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