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Wage Delegation in the Field

Author Info

Listed author(s):
  • Sabrina Jeworrek

    ()

    (Institute for Labour Law and Industrial Relations in the EU, University of Trier)

  • Vanessa Mertins

    ()

    (Institute for Labour Law and Industrial Relations in the EU, University of Trier)

Abstract

By conducting a natural field experiment, we test whether a managerial policy of allowing employees to self-determine their wages is as successful as recently suggested by laboratory evidence. We find that this policy indeed enhances performance. However, our data is clearly at odds with the conjecture of Pareto improvements, since labor costs grow even faster. Admittedly, the performance change is remarkable given that a considerable pay increase has no effect at all. Surprisingly, the data suggests that explicitly denying parts of the workforce this choice boosts performance, too. Additional experimental and survey data provides important insights into employees' underlying motivations.

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File Function: First version, 2014
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Paper provided by Institute of Labour Law and Industrial Relations in the European Union (IAAEU) in its series IAAEU Discussion Papers with number 201408.

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Date of creation: May 2014
Handle: RePEc:iaa:dpaper:201408
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Keywords: Field experiment; Delegation; Reciprocity; Responsibility alleviation; Compensation; Worker empowerment; Workplace democracy;

Find related papers by JEL classification:

  • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
  • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
  • 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
  • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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  1. Gary Charness & Ramon Cobo-Reyes & Natalia Jimenez & Juan A. Lacomba & Francisco Lagos, 2012. "The Hidden Advantage of Delegation: Pareto Improvements in a Gift Exchange Game," American Economic Review, American Economic Association, vol. 102(5), pages 2358-2379, August.
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  15. Alain Cohn & Ernst Fehr & Lorenz Goette, 2013. "Fair wages and effort provision: Combining evidence from the lab and the field," ECON - Working Papers 107, Department of Economics - University of Zurich.
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  18. Jörg Franke & Ruslan Gurtoviy & Vanessa Mertins, 2014. "Workers' Participation in Wage Setting and Opportunistic Behavior: Evidence from a Gift-Exchange Experiment," IAAEU Discussion Papers 201407, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
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  22. repec:dau:papers:123456789/12479 is not listed on IDEAS
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Cited by:

  1. Köhler, Katrin & Pagel, Beatrice & Rau, Holger A., 2015. "How worker participation affects reciprocity under minimum remuneration policies: Experimental evidence," Center for European, Governance and Economic Development Research Discussion Papers 267, University of Goettingen, Department of Economics.
  2. Franke, Jörg & Gurtoviy, Ruslan & Mertins, Vanessa, 2016. "Workers’ participation in wage setting: A gift-exchange experiment," Journal of Economic Psychology, Elsevier, vol. 56(C), pages 151-162.

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