How Do Agents React to Dynamic Wage Increases? An Experimental Study

Dirk Sliwka and Peter Werner

No 9855, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate how workers' performance is affected by the timing of wages in a real-effort experiment. In all treatments agents earn the same wage sum but wage increases are distributed differently over time. We find that agents work harder under increasing wage profiles if they do not know these profiles in advance. A profile that continuously increases wages by small amounts raises performance by about 15% relative to a constant wage. The effort reactions can be organized by a model in which agents reciprocally respond to wage impulses, comparing wages to an adaptive reference standard determined by the previous wage.

Keywords: reference point; reciprocity; wage (search for similar items in EconPapers)
JEL-codes: C91 M12 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2016-03
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - revised version published as 'Wage Increases and the Dynamics of Reciprocity' in: Journal of Labor Economics, 2017, 35 (2), 299-344

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