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Wage dispersion and workers` effort


  • Fernanda Rivas

    () (University of Granada)


We study experimentally the relationship between intra-firm wage dispersion chosen by principals and workers'' performance. Principals show a preference for more egalitarian wage schemes, and workers are negatively influenced by high levels of wage inequality.

Suggested Citation

  • Fernanda Rivas, 2009. "Wage dispersion and workers` effort," Economics Bulletin, AccessEcon, vol. 29(2), pages 788-794.
  • Handle: RePEc:ebl:ecbull:eb-09-00133

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    References listed on IDEAS

    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    3. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    4. Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 437-459.
    5. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    6. Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 44-49, May.
    7. Andrew Clark & Davis Masclet & Marie-Claire Villeval, 2006. "Effort and Comparison Income : Survey and Experimental Evidence," Working Papers 0601, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    8. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    9. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    10. 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.
    11. Werner Güth & Manfred Königstein & Judit Kovács & Enikõ Zala-Mezõ, 2001. "Fairness Within Firms: The Case Of One Principal And Multiple Agents," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 53(2), pages 82-101, April.
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    Cited by:

    1. Gross, Till & Guo, Christopher & Charness, Gary, 2015. "Merit pay and wage compression with productivity differences and uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 233-247.
    2. Axel Ockenfels & Dirk Sliwka & Peter Werner, 2015. "Bonus Payments and Reference Point Violations," Management Science, INFORMS, vol. 61(7), pages 1496-1513, July.
    3. Greiner, Ben & Ockenfels, Axel & Werner, Peter, 2011. "Wage transparency and performance: A real-effort experiment," Economics Letters, Elsevier, vol. 111(3), pages 236-238, June.
    4. Yingchao Zhang & Oliver Fabel & Christian Thomann, 2015. "Pay inequity effects on back-office employees’ job performances: the case of a large insurance firm," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 23(2), pages 421-439, June.
    5. Gary Bolton & Peter Werner, 2016. "The influence of potential on wages and effort," Experimental Economics, Springer;Economic Science Association, vol. 19(3), pages 535-561, September.
    6. Maria Fernanda Rivas & Matthias Sutter, 2008. "Wage dispersion and workers? effort," Working Papers 2008-15, Faculty of Economics and Statistics, University of Innsbruck.

    More about this item


    wage dispersion; effort; experiment; gift-exchange;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs


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