Unequal pay, fairness perceptions, and work effort: Experimental evidence from China

In a field experiment in China, we informed randomly selected workers that others received a higher wage for the same work. Compared to the uninformed but equally paid workers, the informed perceived their pay as less fair, but, surprisingly, increased their output without reducing quality. Although we did not communicate reasons for the pay difference, a post-experiment survey revealed that workers developed their own, predominantly benign, explanations, the leading one being higher quality of the better-paid workers. We validated our experimental results with a follow-up survey of 1100 people of working age in China whom we briefed about our findings and asked for their explanations. 57% believed that the informed workers perceived their higher-paid peers to be better workers and aspired to match them. When asked what they would do in a similar situation, 75% replied that they would work harder as well. Our results hint at the importance of culture in moderating behavioral responses to unequal pay, not all of them necessarily negative.