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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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File URL: http://www.wiwi.uni-jena.de/Papers/jerp2009/wp_2009_107.pdf
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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-107.

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Date of creation: 21 Dec 2009
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Handle: RePEc:jrp:jrpwrp:2009-107
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  1. Claudia Olivetti & Barbara Petrongolo, 2005. "Unequal Pay or Unequal Employment? A Cross-Country Analysis of Gender Gaps," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-013, Boston University - Department of Economics, revised Aug 2008.
  2. 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.
  3. Werner Güth & Martin G. Kocher & Vera Popova, 2010. "Co-employment of permanently and temporarily employed agents," Jena Economic Research Papers 2010-016, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
  5. Fehr, Ernst & Götte, Lorenz & Zehnder, Christian, 2008. "A Behavioral Account of the Labor Market: The Role of Fairness Concerns," IZA Discussion Papers 3901, Institute for the Study of Labor (IZA).
  6. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2009. "Homo Reciprocans: Survey Evidence on Behavioural Outcomes," Munich Reprints in Economics 20055, University of Munich, Department of Economics.
  7. Eyal Winter, 2009. "Incentive Reversal," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 133-47, August.
  8. Gary E Bolton & Jordi Brandts & Axel Ockenfels, 2005. "Fair Procedures: Evidence from Games Involving Lotteries," Economic Journal, Royal Economic Society, vol. 115(506), pages 1054-1076, October.
  9. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  10. 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.
  11. Eyal Winter, 2004. "Incentives and Discrimination," American Economic Review, American Economic Association, vol. 94(3), pages 764-773, June.
  12. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  13. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
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