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Are Notions of Fairness Path‐Dependent? Experimental Evidence from an Efficiency‐Wage Environment

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  • Stan Hu
  • Stuart Mestelman
  • William Scarth

Abstract

We extend the study of efficiency‐wage environments via laboratory experiments in three ways. First, we introduce exogenous shocks that increase the opportunity for rejection of the gift‐exchange outcome. These additional tests emerge since we carefully derive a series of theoretical predictions so that support for efficiency wages requires much more than simply observing that wage and effort levels exceed what would emerge with competition. Second, we focus on how the exogenous shocks can affect how both suppliers and demanders of labour view what is fair. Finally, we provide evidence to bolster our confidence in the applicability of the payroll tax side liability equivalence proposition in public economics.

Suggested Citation

  • Stan Hu & Stuart Mestelman & William Scarth, 2015. "Are Notions of Fairness Path‐Dependent? Experimental Evidence from an Efficiency‐Wage Environment," Department of Economics Working Papers 2015-05, McMaster University.
  • Handle: RePEc:mcm:deptwp:2015-05
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