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Pitfalls of pay transparency: Evidence from the lab and the field

Author

Listed:
  • Katharina Brütt

    (University of Amsterdam)

  • Huaiping Yuan

    (University of Amsterdam)

Abstract

Wage transparency regulation is widely considered and adopted as a tool to reduce the gender wage gap. We combine field and laboratory evidence to address how and when wage transparency can be effective and explore the role of belief adjustments as a mechanism. In the field, this paper studies a German wage transparency policy that allows employees to request wage information of comparable employees. Exploiting variation across firm size and time, we first provide causal evidence that this regulation does not affect the gender wage gap. In an online laboratory experiment, we study whether the failure of this policy hinges on two aspects: (1) the endogenous availability of wage information, and (2) the absence of performance information. Our data underline the importance of both factors. In contrast to endogenously acquired wage information, exogenously provided wage information does increase overall wages. So does the provision of performance information. However, none of these types of information reduce the gender wage gap. Wage information even deters women from entering negotiations.

Suggested Citation

  • Katharina Brütt & Huaiping Yuan, 2022. "Pitfalls of pay transparency: Evidence from the lab and the field," Tinbergen Institute Discussion Papers 22-055/I, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20220055
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    References listed on IDEAS

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    Cited by:

    1. Demir, Gökay, 2023. "Labor Market Frictions and Spillover Effects from Publicly Announced Sectoral Minimum Wages," IZA Discussion Papers 16204, Institute of Labor Economics (IZA).
    2. Demir, Gökay, 2022. "Labor market frictions and spillover effects from publicly announced sectoral minimum wages," Ruhr Economic Papers 985, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Werner, Peter, 2023. "Wage negotiations and strategic responses to transparency," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 161-175.

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    More about this item

    Keywords

    Gender pay gap; Negotiations; Transparency;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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