On the economic architecture of the workplace: repercussions of social comparisons amongst heterogeneous workers

Walter Hyll and Oded Stark

No 6, University of Tübingen Working Papers in Business and Economics from University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics

Abstract: We analyze the impact on a firm's profits and optimal wage rates, and on the distribution of workers' earnings, when workers compare their earnings with those of co-workers. We consider a low-productivity worker who receives lower wage earnings than a high-productivity worker. When the low-productivity worker derives (dis)utility not only from his own effort but also from comparing his earnings with those of the high-productivity worker, his response to the sensing of relative deprivation is to increase the optimal level of effort. Consequently, the firm's profits are higher, its wage rates remain unchanged, and the distribution of earnings is compressed.

Keywords: Social comparisons; Heterogeneous workforce; Relative deprivation; Effort exertion; Earnings gap; Earnings compression (search for similar items in EconPapers)
JEL-codes: D01 D21 J22 J24 J31 M54 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

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Related works:
Journal Article: On the Economic Architecture of the Workplace: Repercussions of Social Comparisons among Heterogeneous Workers (2011)
Working Paper: On the economic architecture of the workplace: Repercussions of social comparisons among heterogeneous workers (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuewef:6

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