The Morale Effects of Pay Inequality

Emily Breza, Supreet Kaur and Yogita Shamdasani

No 22491, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The idea that worker utility is affected by co-worker wages has potentially broad labor market implications. In a month-long experiment with Indian manufacturing workers, we randomize whether co-workers within production units receive the same flat daily wage or different wages (according to baseline productivity rank). For a given absolute wage, pay inequality reduces output and attendance by 0.24 standard deviations and 12%, respectively. These effects strengthen in later weeks. Pay disparity also lowers co-workers’ ability to cooperate in their self-interest. However, when workers can clearly observe productivity differences, pay inequality has no discernible effect on output, attendance, or group cohesion.

JEL-codes: D03 E24 J3 O15 (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-exp, nep-hrm, nep-lma and nep-mac
Note: DEV LS
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Citations: View citations in EconPapers (66)

Published as Emily Breza & Supreet Kaur & Yogita Shamdasani, 2018. "The Morale Effects of Pay Inequality*," The Quarterly Journal of Economics, vol 133(2), pages 611-663.

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Journal Article: The Morale Effects of Pay Inequality (2018)
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