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Social Comparison and Peer effects with Heterogeneous Ability

Aurélie Bonein ()

Economics Working Paper Archive (University of Rennes 1 & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS

Abstract: Whether and how the observability of a coworker’s effort influences an employer’s wage decisions and workers’ effort decisions is a central issue for labor organizations. We conduct an experiment using a three-person gift-exchange game to investigate this matter in the context of wage transparency and heterogeneous abilities. We find that showing a coworker’s effort increases both wages and the difference in wages between two heterogeneously skilled workers when the more able worker is observed. The knowledge of a coworker’s effort increases the level of reciprocity exhibited by observed workers (peer effects), whereas it reduces that exhibited by workers who are observers. Overall, displaying coworker’s effort has a beneficial effect on reciprocity. Regardless of their ability, workers exert levels of effort that are positively related to those of their coworkers. This strategic complementarity of efforts is partially explained by inequity aversion.

Keywords: Heterogeneous ability; Gift-exchange game; Social comparison; Peer effect; Reciprocity (search for similar items in EconPapers)
JEL-codes: C91 D03 J24 J31 J82 (search for similar items in EconPapers)
Date: 2014-08
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-hrm, nep-lab and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:tut:cremwp:201411

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