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Social Comparisons in Wage Delegation: Experimental Evidence

Author

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  • Charness, Gary

    (University of California, Santa Barbara)

  • Cobo-Reyes, Ramón

    (University of Essex)

  • Lacomba, Juan A.

    (Universidad de Granada)

  • Lagos, Francisco Miguel

    (Universidad de Granada)

  • Pérez, José María

    (Universidad de Granada)

Abstract

This article examines whether social comparisons have behavioral effects on workers' performance when a firm can choose workers' wages or let them choose their own. Firms can delegate the wage decision to neither, one or both workers in the firm. We vary the information workers receive, finding that social comparisons concerning both wages and decision rights affect workers' performance. Moreover, the relative effect of discrimination in relation to decision rights is larger than in relation to wage. We find these treatment effects with both stated effort and a real-effort task, suggesting that both approaches may yield similar results.

Suggested Citation

  • Charness, Gary & Cobo-Reyes, Ramón & Lacomba, Juan A. & Lagos, Francisco Miguel & Pérez, José María, 2013. "Social Comparisons in Wage Delegation: Experimental Evidence," IZA Discussion Papers 7802, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7802
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    1. Pablo Brañas-Garza & Elena Molis & Levent Neyse, 2020. "Spread of Information, Inequality and Cooperation," ThE Papers 20/01, Department of Economic Theory and Economic History of the University of Granada..
    2. Shaun Hargreaves Heap & Abhijit Ramalingam & David Rojo Arjona, 2017. "Social Information “Nudges”: An Experiment with Multiple Group References," Southern Economic Journal, John Wiley & Sons, vol. 84(1), pages 348-365, July.
    3. Marco Faillo & Luigi Mittone & Costanza Piovanelli, 2018. "Cash posters in the lab," CEEL Working Papers 1801, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    4. Sautua, Santiago I., 2023. "Disentangling the influences of positive reciprocity and mood on gift exchange at work," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 102(C).
    5. Cardella, Eric & Roomets, Alex, 2022. "Pay distribution preferences and productivity effects: An experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    6. Patrick Bennett & Ian Burn & Luke Walsh, 2023. "The Effect of Pay Transparency Laws on Wages and Discrimination Complaints," Working Papers 202312, University of Liverpool, Department of Economics.
    7. Danková, Katarína & Morita, Hodaka & Servátka, Maroš & Zhang, Le, 2019. "Job assignment and fairness concerns," MPRA Paper 95918, University Library of Munich, Germany.
    8. Fongoni, Marco, 2024. "Does pay inequality affect worker effort? An assessment of experimental designs and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 220(C), pages 697-716.
    9. Sabrina Jeworrek & Vanessa Mertins, 2019. "Wage delegation in the field," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(4), pages 656-669, November.
    10. Zhang, Mengyao & Gou, Qinglong & Yu, Lili & Zhang, Juzhi, 2022. "Pricing decisions for a social comparison product supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 168(C).
    11. Burn, Ian & Kettler, Kyle, 2019. "The more you know, the better you’re paid? Evidence from pay secrecy bans for managers," Labour Economics, Elsevier, vol. 59(C), pages 92-109.
    12. Brañas-Garza, Pablo & Molis, Elena & Neyse, Levent, 2021. "Exposure to inequality may cause under-provision of public goods: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 92(C).
    13. Charness, Gary & Gneezy, Uri & Henderson, Austin, 2018. "Experimental methods: Measuring effort in economics experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 74-87.
    14. Lara Ezquerra & Joaquin Gomez-Minambres & Natalia Jiminez & Praveen Kujal, 2021. "Making it public: The effect of (private and public) wage proposals on efficiency and income distribution," Working Papers 21-12, Chapman University, Economic Science Institute.
    15. Dhillon, Amrita & Peeters, Ronald & Bartrum, Oliver & Yüksel, Ayşe Müge, 2020. "Hiring an employee’s friends is good for business: Overcoming moral hazard with social networks," Labour Economics, Elsevier, vol. 67(C).
    16. Mohsen Javdani & Brian Krauth, 2020. "Job satisfaction and co‐worker pay in Canadian firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 212-248, February.
    17. Ezquerra, Lara & Gómez-Miñambres, Joaquín & Jimenez, Natalia & Kujal, Praveen, 2023. "The effect of wage proposals on efficiency and income distribution," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 469-493.
    18. Marco Faillo & Costanza Piovanelli, 2017. "Wage delegation and intrinsic motivation: an experimental study," CEEL Working Papers 1701, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    19. Dodonova, Anna & Khoroshilov, Yuri, 2014. "Compensation and performance: An experimental study," Economics Letters, Elsevier, vol. 124(2), pages 304-307.

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    More about this item

    Keywords

    delegation; gift-exchange; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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