What determines workers’ preferences for efficiency over equity wages?

Prosper Bangwayo-Skeete, Afaf H. Rahim () and Precious Zikhali ()
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Afaf H. Rahim: Philipps-University Marburg
Precious Zikhali: VU University Amsterdam

No 200933, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: What makes workers consider it fair for wages to be indexed on job performance or efficiency? In this paper we attempt to answer this question using the 2005 wave of the World Values Survey data for 43 countries to investigate what socio-economic characteristics condition employees’ preference for efficiency over equity wages. Our results suggest that employees’ preference for efficiency wages increases with education and globalization while it decreases with unemployment, income inequality and income tax rates. Given that conventional economic theory demonstrates the importance of labour efficiency, which improves when workers are remunerated according to their efficiency, for economic growth; our results suggest that institutions and specifically public policies that promote education, and globalization, along with policies that reduce unemployment, income inequality and income tax rates could be used to promote efficiency-based wages.

JEL-codes: D02 I21 O15 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2009
New Economics Papers: this item is included in nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200933

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