On the Relevance and Composition of Gifts within the Firm: Evidence from Field Experiments

Charles Bellemare () and Bruce S. Shearer ()
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Bruce S. Shearer: Université Laval

No 4339, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We investigate the economic relevance and the composition of gifts within a firm where output is contractible. We develop a structural econometric model that identifies workers' optimal reaction to monetary gifts received from their employer. We estimate the model using data from two separate field experiments, both conducted within a tree-planting firm. We use the estimated structural parameters to generalize beyond the experiment, simulating how workers would react to different gifts on the part of the firm, within different labour-market settings. We find that gifts have a role to play within this firm, increasing in importance when the workers' outside alternatives deteriorate. Profit-maximizing gifts would increase profits within slack labour markets by up to 10% on average and by up to 17% for certain types of workers. These gifts represent significant increases in worker earnings; the average gift paid to workers attains 22% of average expected earnings in the absence of gifts. We find that gifts should be given by setting piece-rates above the market-clearing level rather than through fixed wages.

Keywords: gift giving; structural models; field experiments (search for similar items in EconPapers)
JEL-codes: J33 M52 C93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-mic and nep-sbm
Date: 2009-08
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