In search of worker's real effort reciprocity: A field and a laboratory experiment

We present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages. Work effort neither reacts to an increase of the own wage, nor to a positive or negative peer comparison. This result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort. In an additional real-effort laboratory experiment we show that explicit cost and surplus information that enables an exact calculation of an employer's surplus from the work contract is a crucial prerequisite for a positive wage-effort relation. This demonstrates that an employee's reciprocity requires a clear assessment of the surplus at stake. (JEL: C91, C92, J41) (c) 2010 by the European Economic Association.

[1]  H. Minardi.  One day at a time. , 2006, Nursing times.

[2]  Gary Charness,et al.  Does Pay Inequality Affect Worker Effort? Experimental Evidence , 2006, Journal of Labor Economics.

[3]  Janet L. Yellen,et al.  The Fair Wage-Effort Hypothesis and Unemployment , 1990 .

[4]  R. Thaler,et al.  Labor Supply of New York City Cabdrivers: One Day at a Time , 1997 .

[5]  C. Lévi-Strauss,et al.  Experimental investigation , 2013 .

[6]  G. Harrison,et al.  Field experiments , 1924, The Journal of Agricultural Science.

[7]  Ernst Fehr,et al.  Do Workers Work More if Wages are High? Evidence from a Randomized Field Experiment , 2007 .

[8]  David L. Dickinson,et al.  An Experimental Examination of Labor Supply and Work Intensities , 1999, Journal of Labor Economics.

[9]  E. Fehr,et al.  Do Workers Work More If Wages are High? Evidence from a Randomized Field Experiment , 2005 .

[10]  Dirk Sliwka,et al.  Transparency and Reciprocal Behavior in Employment Relations , 2003, SSRN Electronic Journal.

[11]  George A. Akerlof.  Labor Contracts as Partial Gift Exchange , 1982 .

[12]  Uri Gneezy,et al.  Does high wage lead to high profits? An experimental study of reciprocity using real effort , 2002 .

[13]  P. Kuhn,et al.  Do Co-Workers' Wages Matter? Theory and Evidence on Wage Secrecy, Wage Compression and Effort , 2004, SSRN Electronic Journal.

[14]  J. S. Adams,et al.  The relationship of worker productivity to cognitive dissonance about wage inequities. , 1962 .

[15]  E. Fehr,et al.  Does Fairness Prevent Market Clearing? An Experimental Investigation , 1993 .

[16]  G. Charness.  Attribution and Reciprocity in an Experimental Labor Market , 2002, Journal of Labor Economics.

[17]  J. Kagel,et al.  How Robust is Laboratory Gift Exchange? , 2001 .

[18]  L. Summers.  Relative Wages, Efficiency Wages, and Keynesian Unemployment , 1988 .

[19]  E. Fehr,et al.  When Social Norms Overpower Competition: Gift Exchange in Experimental Labor Markets , 1998, Journal of Labor Economics.

[20]  Bernd Irlenbusch,et al.  Fairness as a constraint on trust in reciprocity: earned property rights in a reciprocal exchange experiment , 2000 .

[21]  Adams Js.  Towards an understanding of inequity , 1963 .

[22]  S. Gächter,et al.  Reputation and Reciprocity: Consequences for the Labour Relation , 2001, SSRN Electronic Journal.

[23]  Ido Erev,et al.  Constructive Intergroup Competition as a Solution to the Free Rider Problem: A Field Experiment , 1993 .

[24]  A. Ichino,et al.  Clean Evidence on Peer Effects , 2006, Journal of Labor Economics.

[25]  G. Saint‐Paul,et al.  How Do Firing Costs Affect Worker Flows in a World with Adverse Selection? , 2004, Journal of Labor Economics.

[26]  R. Nagel,et al.  Experimental results on ultimatum games with incomplete information , 1993 .

[27]  E. Lavernia,et al.  An experimental investigation , 1992, Metallurgical and Materials Transactions A.

[28]  E. Fehr,et al.  Wage Rigidity in a Competitive Incomplete Contract Market , 1999, Journal of Political Economy.

[29]  Incomplete and Asymmetric Surplus Information in Labor Relations , 2003 .