Wage negotiations and strategic responses to transparency

Peter Werner

Journal of Economic Behavior & Organization, 2023, vol. 209, issue C, 161-175

Abstract: This paper experimentally investigates how exogenous and endogenous wage transparency affect the interactions between employers and employees in a labor environment characterized by gift exchange. After the first part of the experiment in which wage offers always remain private information, three treatments in the second part either make wages fully transparent or leave the choice to establish (costly) wage transparency either to employees or employers. When full transparency is induced exogenously, the share of equal wage offers increases in the second part. At the same time, employers and employees rarely induce wage transparency themselves. Moreover, in the treatment where employees could enforce transparency, average wage offers and performance are significantly lower than in the other treatments. Results from a control treatment indicate that employees’ requests for wage information are cost-sensitive. If information about co-employees’ wage offers is costless, employees almost always ask for this information, thus achieving nearly full wage transparency. Further analyses reveal that wage offers in the second part seem to be higher under transparency than under non-transparency of wage offers.

Keywords: Wage transparency; Wage negotiations; Relative pay; Real effort; Gift exchange (search for similar items in EconPapers)
JEL-codes: D04 D63 J31 M52 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:209:y:2023:i:c:p:161-175

DOI: 10.1016/j.jebo.2023.02.024

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