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Exploring the Effects of Unequal and Secretive Pay

  • Sven Fischer


    (Max Planck Institute for Research on Collective Goods)

  • Eva-Maria Steiger


    (Stratigic Interaction Group, Max Planck Institute of Economics, Jena)

We experimentally test whether intentional and observable discriminatory pay of symmetric agents in the Winter (2004) game causes low paid agents to reduce effiort. We control for intentionality of wages by either allowing a principal to determine wages or by implementing a random process. Our main observations are that discrimination has no negative effiect on effiorts and principals do not shy away from using discriminatory pay if it is observable. Rather, with experience discrimination enhances efficiency as it facilitates coordination among agents. The only evidence for reciprocity is that subjects receiving a low payment from a principal (discriminatory or not) exert signiï¬cantly less effort.

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Paper provided by Friedrich-Schiller-University Jena in its series Jena Economic Research Papers with number 2009-107.

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Date of creation: 21 Dec 2009
Date of revision:
Handle: RePEc:jrp:jrpwrp:2009-107
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  2. Ernst Fehr & Lorenz Goette & Christian Zehnder, 2008. "A behavioral account of the labor market: the role of fairness concerns," IEW - Working Papers 394, Institute for Empirical Research in Economics - University of Zurich.
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  4. Gary Charness & Peter Kuhn, 2007. "Does Pay Inequality Affect Worker Effort? Experimental Evidence," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 693-723.
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  7. Claudia Olivetti & Barbara Petrongolo, 2005. "Unequal pay or unequal employment? A cross-country analysis of gender gaps," Boston University - Department of Economics - Working Papers Series WP2005-008, Boston University - Department of Economics.
  8. Sebastian J. Goerg & Sebastian Kube & Ro'i Zultan, 2010. "Treating Equals Unequally: Incentives in Teams, Workers' Motivation, and Production Technology," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 747-772, October.
  9. Eyal Winter, 2004. "Incentives and Discrimination," American Economic Review, American Economic Association, vol. 94(3), pages 764-773, June.
  10. Gary E. Bolton & Jordi Brandts & Axel Ockenfels, 2000. "Fair Procedures. Evidence from Games Involving Lotteries," UFAE and IAE Working Papers 483.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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  12. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
  13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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