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Exploring the Effects of Unequal and Secretive Pay

Author

Listed:
  • Sven Fischer

    () (Max Planck Institute for Research on Collective Goods)

  • Eva-Maria Steiger

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

Abstract

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.

Suggested Citation

  • Sven Fischer & Eva-Maria Steiger, 2009. "Exploring the Effects of Unequal and Secretive Pay," Jena Economic Research Papers 2009-107, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2009-107
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    File URL: http://www.wiwi.uni-jena.de/Papers/jerp2009/wp_2009_107.pdf
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    References listed on IDEAS

    as
    1. Eyal Winter, 2004. "Incentives and Discrimination," American Economic Review, American Economic Association, vol. 94(3), pages 764-773, June.
    2. Ernst Fehr & Lorenz Goette & Christian Zehnder, 2009. "A Behavioral Account of the Labor Market: The Role of Fairness Concerns," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 355-384, May.
    3. Claudia Olivetti & Barbara Petrongolo, 2008. "Unequal Pay or Unequal Employment? A Cross-Country Analysis of Gender Gaps," Journal of Labor Economics, University of Chicago Press, vol. 26(4), pages 621-654, October.
    4. Eyal Winter, 2009. "Incentive Reversal," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 133-147, August.
    5. Angelova, Vera & Güth, Werner & Kocher, Martin G., 2012. "Co-employment of permanently and temporarily employed agents," Labour Economics, Elsevier, vol. 19(1), pages 48-58.
    6. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2009. "Homo Reciprocans: Survey Evidence on Behavioural Outcomes," Economic Journal, Royal Economic Society, vol. 119(536), pages 592-612, March.
    7. 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.
    8. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    9. 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.
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    13. 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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    Citations

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    Cited by:

    1. Anat Bracha & Uri Gneezy & George Loewenstein, 2015. "Relative Pay and Labor Supply," Journal of Labor Economics, University of Chicago Press, vol. 33(2), pages 297-315.
    2. Saima Naeem & Asad Zaman, 2013. "For Love or Money? Motivating Workers," PIDE-Working Papers 2013:90, Pakistan Institute of Development Economics.
    3. 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.

    More about this item

    Keywords

    wage discrimination; experimental study; envy; reciprocity; pay secrecy;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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