What is a fair wage? Reference points, entitlements and gift exchange

Eleonora Bottino, Teresa García-Muñoz, Cintia Goddio and Praveen Kujal

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2016, vol. 63, issue C, 125-135

Abstract: We look at the effect of endogenous and exogenous wage setting institutions on wage offers and effort in the classic gift exchange experiments (Fehr et al., 1993). An exogenously imposed minimum wage at the competitive outcome lowers average wage offers. Workers do not negatively reciprocate and continue to offer high effort. In the endogenous wage setting institution, where workers first make wage proposals, wage offers increase marginally and average effort decreases relative to the baseline when wage proposals are not matched. Relative to the baseline, efficiency decreases in the minimum wage treatment while it marginally increases in the endogenous treatment. We find evidence that the institutional structure has important implications towards wage offers, effort and efficiency.

Keywords: Exogenous wage setting; Endogenous wage setting; Entitlements; Gift exchange (search for similar items in EconPapers)
JEL-codes: J2 J3 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Working Paper: What is a fair wage? Reference points, Entitlements and Gift Exchange (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:63:y:2016:i:c:p:125-135

DOI: 10.1016/j.socec.2016.06.002

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