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Fairness and Freight-Handlers: Local Labor-Market Conditions and Wage-Fairness Perceptions in a Trucking Firm

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  • Verhoogen, Eric

    () (Columbia University)

  • Burks, Stephen V.

    () (University of Minnesota, Morris)

  • Carpenter, Jeffrey P.

    () (Middlebury College)

Abstract

This paper draws on evidence from an internal attitude survey in the freight-handling terminals of a unionized trucking firm to investigate the effect of local labor market conditions on employee wage-fairness perceptions. The key element of our research design is that local managers have no discretion to vary wage rates in response to local labor market conditions; local economic shocks thus generate exogenous variation in the attractiveness of the wage paid by the firm relative to employees’ options in the outside labor market. We find robust associations between two indicators of local conditions – the rate of unemployment and the wages of similar workers in the outside market – and the wage-fairness perceptions of employees in the firm, which we argue reflects a causal relationship. As an extension, we relate the changes in local conditions and fairness perceptions to changes in employee performance, as measured by the rate of disciplinary dismissals. We find suggestive evidence that increased local unemployment leads to improved employee performance, and, conditional on a particular assumption about the mechanism through which local conditions affect performance, that increases in wage-fairness perceptions lead employees to supply more effort.

Suggested Citation

  • Verhoogen, Eric & Burks, Stephen V. & Carpenter, Jeffrey P., 2004. "Fairness and Freight-Handlers: Local Labor-Market Conditions and Wage-Fairness Perceptions in a Trucking Firm," IZA Discussion Papers 1352, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1352
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    References listed on IDEAS

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    1. Peter Cappelli & Keith Chauvin, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 769-787.
    2. Bowles, Samuel, 1985. "The Production Process in a Competitive Economy: Walrasian, Neo-Hobbesian, and Marxian Models," American Economic Review, American Economic Association, vol. 75(1), pages 16-36, March.
    3. 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.
    4. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
    5. Barry T. Hirsch & Edward J. Schumacher, 2004. "Match Bias in Wage Gap Estimates Due to Earnings Imputation," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 689-722, July.
    6. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    7. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    8. Simon G�chter & Ernst Fehr, "undated". "Fairness in the Labour Market � A Survey of Experimental Results," IEW - Working Papers 114, Institute for Empirical Research in Economics - University of Zurich.
    9. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    10. George A. Akerlof & Andrew K. Rose & Janet L. Yellen, 1988. "Job Switching and Job Satisfaction in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 495-594.
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    Cited by:

    1. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2012. "North–South technology transfer in unionised multinationals," Journal of Development Economics, Elsevier, vol. 99(2), pages 385-395.
    2. Mary Amiti & Donald R. Davis, 2012. "Trade, Firms, and Wages: Theory and Evidence," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 1-36.
    3. Altmann, Steffen & Falk, Armin & Huffman, David B., 2010. "Implicit Contracts, Unemployment, and Labor Market Segmentation," IZA Discussion Papers 5001, Institute for the Study of Labor (IZA).
    4. Tao, Hung-Lin, 2015. "Multiple earnings comparisons and subjective earnings fairness: A cross-country study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 45-54.
    5. Alexandre Mas, 2006. "Pay, Reference Points, and Police Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 121(3), pages 783-821.

    More about this item

    Keywords

    fairness; gift exchange; reference point; efficiency wage;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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