Does Pay Inequality Affect Worker Effort? Experimental Evidence
Gary Charness () and
Peter Kuhn ()
Journal of Labor Economics, 2007, vol. 25, 693-723
We study worker behavior in an efficiency-wage environment in which coworkersâ€™ wages can influence a workerâ€™s effort. Theoretically, we show that an increase in workersâ€™ responsiveness to coworkersâ€™ wages should lead profit-maximizing firms to compress wages. Our laboratory experiments, by contrast, show that while workersâ€™ effort choices are highly sensitive to their own wages, effort is not affected by coworkersâ€™ wages. This casts doubt on the notion that workersâ€™ concerns with equity might explain pay policies such as wage compression or wage secrecy.
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlabec:v:25:y:2007:p:693-723
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