Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior

Arindrajit Dube, Laura Giuliano and Jonathan Leonard ()

American Economic Review, 2019, vol. 109, issue 2, 620-63

Abstract: We analyze how separations responded to arbitrary differences in own and peer wages at a large US retailer. Regression-discontinuity estimates imply large causal effects of own-wages on separations, and on quits in particular. However, this own-wage response could reflect comparisons either to market wages or to peer wages. Estimates using peer-wage discontinuities show large peer-wage effects and imply the own-wage separation response mostly reflects peer comparisons. The peer effect is driven by comparisons with higher-paid peers—suggesting concerns about fairness. Separations appear fairly insensitive when raises are similar across peers—suggesting search frictions and monopsony are relevant in this low-wage sector.

JEL-codes: D63 J31 J42 J62 L81 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20160232
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Citations: View citations in EconPapers (95)

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Related works:
Working Paper: Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior (2018)
Working Paper: Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior (2015)
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