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Gift Exchange in the Workplace: Money or Attention?

  • Robert Dur

We develop a model of manager-employee relationships where employees care more for their manager when they are more convinced that their manager cares for them. Managers can signal their altruistic feelings towards their employees in two ways: by offering a generous wage and by giving attention. Contrary to the traditional gift-exchange hypothesis, we show that altruistic managers may offer lower wages and nevertheless build up better social-exchange relationships with their employees than egoistic managers do. In such equilibria, a low wage signals to employees that the manager has something else to offer — namely, a lot of attention — which will induce the employee to stay at the firm and work hard. Our predictions are well in line with some recent empirical findings about gift exchange in the field.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2496.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2496
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  1. Carl M. Campbell III & Kunal S. Kamlani, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 759-789.
  2. Sebastian Kube & Michel Andre Marechal & Clemens Puppe, 2012. "The Currency of Reciprocity: Gift Exchange in the Workplace," American Economic Review, American Economic Association, vol. 102(4), pages 1644-62, June.
  3. Uri Gneezy & John A List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," Econometrica, Econometric Society, vol. 74(5), pages 1365-1384, 09.
  4. Rotemberg, Julio J., 2006. "Altruism, reciprocity and cooperation in the workplace," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  5. Julio J. Rotemberg & Garth Saloner, 1993. "Leadership Style and Incentives," Management Science, INFORMS, vol. 39(11), pages 1299-1318, November.
  6. Wolfgang Pesendorfer & Faruk Gul, 2007. "The Canonical Space for Behavioral Types," Levine's Bibliography 843644000000000345, UCLA Department of Economics.
  7. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  8. 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.
  9. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July.
  10. Abdolkarim Sadrieh & Bettina Rockenbach & Heike Hennig-Schmidt, 2005. "In search of worker's real effort reciprocity - a field and a laboratory experiment," Artefactual Field Experiments 00065, The Field Experiments Website.
  11. Julio J. Rotemberg, 2006. "Minimally acceptable altruism and the ultimatum game," Working Papers 06-12, Federal Reserve Bank of Boston.
  12. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June.
  13. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
  14. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, vol. 45(10), pages 1793-1810, December.
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