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Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine!

Author

Listed:
  • Hernán Bejarano

    (Centro de Investigación y Docencia Económicas (CIDE), Mexico)

  • Brice Corgnet

    (Univ Lyon, CNRS, GATE UMR5824, 93 Chemin des Mouilles, F-69130, France; emlyon business school, 23 avenue guy de collongue, Ecully 69130)

  • Joaquín Gómez-Miñambres

    (Lafayette College, Department of Economics, 730 High Street, Easton, PA 18042. Chapman University, Economic Science Institute. One University Drive, Orange, California 92866)

Abstract

We extend Akerlof’s (1982) gift-exchange model to the case in which reference wages respond to changes in the work environment such as those related to unemployment benefits or workers’ productivity levels. Our model shows that these changes spur disagreements between workers and employers regarding the value of the reference wage. These disagreements tend to weaken the gift-exchange relationship thus reducing production levels and wages. We find support for these predictions in a controlled, yet realistic, workplace environment. Our work also sheds light on several stylized facts regarding employment relationships such as the increased intensity of labor conflicts when economic conditions are unstable.

Suggested Citation

  • Hernán Bejarano & Brice Corgnet & Joaquín Gómez-Miñambres, 2019. "Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine!," Working Papers 1929, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:1929
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    More about this item

    Keywords

    Gift-exchange; incentives; self-serving biases; reference-dependent utility; laboratory experiments; labor conflicts;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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