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Are efficiency wages equality wages? Exogenously induced fairness norms in working environments

Author

Listed:
  • Gary Bolton
  • Peter Werner

Abstract

We investigate how the introduction of a salient norm for pay differentiation influences wage offers and effort exertion in a gift exchange experiment. Exogenously induced claims indeed lead to substantial differentiation in wages. At the same time, unequal wage schemes do not crowd out effort exertion. In particular, we do not observe strong detrimental effects resulting from disadvantageous relative wage positions. Finally, we find that specific communication patterns have a significant impact on effort exertion.

Suggested Citation

  • Gary Bolton & Peter Werner, 2012. "Are efficiency wages equality wages? Exogenously induced fairness norms in working environments," Working Paper Series in Economics 56, University of Cologne, Department of Economics.
  • Handle: RePEc:kls:series:0056
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    File URL: http://ockenfels.uni-koeln.de/fileadmin/wiso_fak/stawi-ockenfels/pdf/wp_series_download/wp0056.pdf
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    References listed on IDEAS

    as
    1. Rankin, Frederick W., 2006. "Requests and social distance in dictator games," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 27-36, May.
    2. Dirk Sliwka, 2007. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," American Economic Review, American Economic Association, pages 999-1012.
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    Cited by:

    1. Gross, Till & Guo, Christopher & Charness, Gary, 2015. "Merit pay and wage compression with productivity differences and uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 233-247.

    More about this item

    Keywords

    Communication; entitlements; fairness norms; gift exchange; relative wages;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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