IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article

Testing Fair Wage Theory

  • John Burger

    ()

  • Stephen Walters

    ()

Fairness considerations often are invoked to explain wage differences that appear unrelated to worker characteristics or job conditions, but non-experimental tests of fair wage models are rare and weak because of the limits of available market-generated data. In particular, such data rarely permit researchers to (a) identify suitable reference points that employees and employers might use in determining what is fair and (b) control for employees’ marginal output and its value. This study utilizes a unique dataset from the baseball labor market that solves both problems. We find no support for fair wage theory in this market. We also find that fairness premia can be illusory: Wages appear to be adjusted upward for reasons of fairness in regressions that control for variation in individuals’ physical output, but such premia evaporate when the value of that output (which can be market- or firm-specific) is held constant. This suggests that avoiding proxy measures of workers’ marginal revenue products in wage studies might reduce the number of labor market "anomalies" economists must resolve.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1007/s12122-007-9044-8
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal Journal of Labor Research.

Volume (Year): 29 (2008)
Issue (Month): 4 (December)
Pages: 318-332

as
in new window

Handle: RePEc:spr:jlabre:v:29:y:2008:i:4:p:318-332
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/journal/12122

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Skott, Peter, 2005. "Fairness as a source of hysteresis in employment and relative wages," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 305-331, July.
  2. Thierry Lallemand & Robert Plasman & François Rycx, 2004. "Intra-Firm Wage Dispersion and Firm Performance: Evidence from Linked Employer-Employee Data," Kyklos, Wiley Blackwell, vol. 57(4), pages 533-558, November.
  3. Paul M. Sommers & Noel Quinton, 1982. "Pay and Performance in Major League Baseball: The Case of the First Family of Free Agents," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 426-436.
  4. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  5. 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.
  6. McKinley Blackburn & David Neumark, 1991. "Unobserved Ability, Efficiency Wages, and Interindustry Wage Differentials," NBER Working Papers 3857, National Bureau of Economic Research, Inc.
  7. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High Wage Workers and High Wage Firms," NBER Working Papers 4917, National Bureau of Economic Research, Inc.
  8. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers 120, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Alan S. Blinder & Don H. Choi, 1989. "A Shred of Evidence on Theories of Wage Stickiness," NBER Working Papers 3105, National Bureau of Economic Research, Inc.
  10. John D. Burger & Stephen J.K. Walters, 2005. "Arbitrator Bias and Self-Interest: Lessons from the Baseball Labor Market," Journal of Labor Research, Transaction Publishers, vol. 26(2), pages 267-280, January.
  11. Rees, Albert, 1993. "The Role of Fairness in Wage Determination," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 243-52, January.
  12. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  13. 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.
  14. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  15. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  16. Robert Gibbons & Lawrence Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 515-535.
  17. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  18. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64, pages 242.
  19. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  20. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  21. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  22. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-30, December.
  23. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  24. Walter Y. Oi & Todd L. Idson, 1999. "Workers Are More Productive in Large Firms," American Economic Review, American Economic Association, vol. 89(2), pages 104-108, May.
  25. William T. Dickens, 1986. "Wages, Employment and the Threat of Collective Action by Workers," NBER Working Papers 1856, National Bureau of Economic Research, Inc.
  26. Strom, Bjarne, 1995. "Envy, Fairness and Political Influence in Local Government Wage Determination: Evidence from Norway," Economica, London School of Economics and Political Science, vol. 62(247), pages 389-409, August.
  27. Oi, Walter Y, 1983. "Heterogeneous Firms and the Organization of Production," Economic Inquiry, Western Economic Association International, vol. 21(2), pages 147-71, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:spr:jlabre:v:29:y:2008:i:4:p:318-332. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

or (Rebekah McClure)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.