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Gift Exchange in the Lab - It is not (only) how much you give ..

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  • Florian Englmaier
  • Stephen G. Leider

Abstract

An important aspect in determining the effectiveness of gift exchange relations in labor markets is the ability of the worker to “repay the gift” to the employer. To test this hypothesis, we conduct a real effort laboratory experiment where we vary the wage and the effect of the worker’s effort on the manager’s payoff. Furthermore we collect additional information that allows us to control for the workers’ ability and whether they can be classified as reciprocal or not. From our agency model of reciprocal motivation we derive non-trivial predictions about which is the marginal worker (in terms of ability) affected by our experimental variation and how different types of individuals, selfish and reciprocal, will react to it. Our model does substantially better than other theories in organizing the data.

Suggested Citation

  • Florian Englmaier & Stephen G. Leider, 2010. "Gift Exchange in the Lab - It is not (only) how much you give ..," CESifo Working Paper Series 2944, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2944
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp2944.pdf
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    References listed on IDEAS

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    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. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    4. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    5. Florian Englmaier & Stephen Leider, 2012. "Contractual and Organizational Structure with Reciprocal Agents," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 146-183, May.
    6. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine.
    7. Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May.
    8. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    9. Irlenbusch, Bernd & Sliwka, Dirk, 2005. "Transparency and reciprocal behavior in employment relations," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 383-403, March.
    10. Sandra Maximiano & Randolph Sloof & Joep Sonnemans, 2007. "Gift Exchange in a Multi-Worker Firm," Economic Journal, Royal Economic Society, vol. 117(522), pages 1025-1050, July.
    11. Armin Falk, 2007. "Gift Exchange in the Field," Econometrica, Econometric Society, vol. 75(5), pages 1501-1511, September.
    12. Fehr, Ernst & Falk, Armin, 2008. "Reciprocity in Experimental Markets," Handbook of Experimental Economics Results, Elsevier.
    13. Nava Ashraf & Iris Bohnet & Nikita Piankov, 2006. "Decomposing trust and trustworthiness," Experimental Economics, Springer;Economic Science Association, vol. 9(3), pages 193-208, September.
    14. Irlenbusch, Bernd & Sliwka, Dirk, 2003. "Transparency and Reciprocal Behavior," IZA Discussion Papers 887, Institute for the Study of Labor (IZA).
    15. David H. Autor & David Scarborough, 2008. "Does Job Testing Harm Minority Workers? Evidence from Retail Establishments," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 219-277.
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    Citations

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    Cited by:

    1. Bradler, Christiane & Neckermann, Susanne & Warnke, Arne Jonas, 2016. "Incentivizing creativity: A large-scale experiment with tournaments and gifts," ZEW Discussion Papers 16-040, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Sascha Becker & Dolores Messer & Stefan C. Wolter, 2011. "A Gift is not Always a Gift: Gift Exchange in a Voucher Experiment," CESifo Working Paper Series 3488, CESifo Group Munich.
    3. Kim, Min-Taec & Slonim, Robert, 2012. "The Multi-Dimensional Effects of Reciprocity on Worker Effort: Evidence from a Hybrid Field-Laboratory Labor Market Experiment," IZA Discussion Papers 6410, Institute for the Study of Labor (IZA).
    4. Saima Mahmood & Asad Zaman, 2010. "Monetary and Non-monetary Gift Exchange," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 719-740.
    5. Florian Englmaier & Thomas Kolaska & Stephen G. Leider, 2015. "Reciprocity in Organisations - Evidence from the WERS," CESifo Working Paper Series 5168, CESifo Group Munich.
    6. Florian Englmaier & Stephen Leider, 2012. "Contractual and Organizational Structure with Reciprocal Agents," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 146-183, May.
    7. Koch, Alexander K. & Nafziger, Julia, 2015. "A Real-Effort Experiment on Gift Exchange with Temptation," IZA Discussion Papers 9084, Institute for the Study of Labor (IZA).
    8. Florian Englmaier & Stephen G. Leider, 2012. "Managerial Payoff and Gift Exchange in the Field," CESifo Working Paper Series 3707, CESifo Group Munich.
    9. D'Agostino, Elena & Lisciandra, Maurizio, 2012. "Enforceable vs. non-enforceable contracts: a theoretical appraisal with fair players," MPRA Paper 41261, University Library of Munich, Germany.

    More about this item

    Keywords

    reciprocity; fairness; real effort experiment; personality tests;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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