Fair Wages When Employers Face the Risk of Losing Money
AbstractWe study the behavior of employers and employees in a gift exchange game and find that employers offer lower wages when there is the risk of losing money. This, however, does not lead to lower effort level choices. In fact, effort per wage unit is significantly higher in the treatment with potential employer losses. This result can be in line with social comparison theories that are based on relative payoff differences. Alternatively, this result is also in line with the hypothesis that the risk of losing money increases the credibility of the employer's trust signal and, thus, the employee's reciprocity.
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Bibliographic InfoPaper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 110009.
Length: 8 pages
Date of creation: Apr 2011
Date of revision:
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More information through EDIRC
fair wage; efficiency wage; social comparison; loss aversion;
Other versions of this item:
- Gose, Karina & Sadrieh, Abdolkarim, 2012. "Fair wages when employers face the risk of losing money," Economics Letters, Elsevier, vol. 117(3), pages 687-690.
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
- NEP-CBE-2011-07-13 (Cognitive & Behavioural Economics)
- NEP-EVO-2011-07-13 (Evolutionary Economics)
- NEP-EXP-2011-07-13 (Experimental Economics)
- NEP-HRM-2011-07-13 (Human Capital & Human Resource Management)
- NEP-LAB-2011-07-13 (Labour Economics)
- NEP-LMA-2011-07-13 (Labor Markets - Supply, Demand, & Wages)
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