The Uncertain Wage - Effort Hypothesis and Wage Secrecy

Li Gan ()

The B.E. Journal of Economic Analysis & Policy, 2002, vol. 2, issue 1, 1-17

Abstract: In this paper, we introduce uncertainty into Akerlof and Yellen (1990)'s fair wage effort hypothesis. In this uncertain fair wage hypothesis, employers do not have perfect information concerning an employee's perception of a fair wage, but assume the perceived fair wage is distributed as a random variable with a known distribution. Our wage model, built on this hypothesis, is applied to analyze the widely adopted policy of wage secrecy, suggesting a wage secrecy policy is more likely to produce higher satisfaction for employees and higher profit for employers.

Date: 2002
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DOI: 10.2202/1538-0653.1040

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