Inequality Aversion and the Distribution of Rewards in Organizations

Mamadou Gueye (), Nicolas Querou and Raphael Soubeyran

CEE-M Working Papers from CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro

Abstract: Motivated by the potential tension between coordination, which may require discriminating among identical workers, and social comparisons, which may intuitively call for small pay differentials, we analyze the design of optimal rewards in an organization with inequality-averse workers whose tasks are complementary. Inequality aversion surprisingly results in higher monetary incentives and may also yield more inequality among agents. We also show that disadvantageous inequality aversion is of first-order importance compared to advantageous inequality aversion, a result that is consistent with existing evidence. Moreover, the distribution of rewards may be non monotonic, with the most inequality-averse agents lying at both ends of the distribution. Our analysis also sheds light on the crucial role of coordination, as most results would be reversed if the principal could costlessly select her most preferred equilibrium outcome.

Keywords: incentives; coordination; principal; agents; social comparisons (search for similar items in EconPapers)
Date: 2021-02-08
New Economics Papers: this item is included in nep-hrm
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-03134262v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://hal.inrae.fr/hal-03134262v1/document (application/pdf)

Related works:
Working Paper: Inequality Aversion and the Distribution of Rewards in Organizations (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpceem:hal-03134262

Access Statistics for this paper

More papers in CEE-M Working Papers from CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro Contact information at EDIRC.
Bibliographic data for series maintained by Laurent Garnier ().