Gift Exchange and Workers' Fairness Concerns: When Equality is Unfair

By Johannes Abeler, Steffen Altmann, Sebastian Kube, M. Wibral. Social Science Research Network, 2010

161 citations recorded by the source corpus.

We study how different payment modes influence the effectiveness of gift exchange as a contract enforcement device. In particular, we analyze how horizontal fairness concerns affect performance and efficiency in an environment characterized by contractual incompleteness. In our experiment, one principal is matched with two agents. The principal pays equal wages in one treatment and can set individual wages in the other. We find that the use of equal wages elicits substantially lower efforts. This is not caused by monetary incentives per se since under both wage schemes it is profit-maximizing for agents to exert high efforts. The treatment difference instead seems to be driven by the fact that the norm of equity is violated far more frequently in the equal wage treatment. After having suffered from violations of the equity principle, agents withdraw effort. These findings hold even after controlling for the role of intentions, as we show in a third treatment. Our results suggest that adherence to the norm of equity is a necessary prerequisite for successful establishment of gift-exchange relations.

Subfields: Demography, Economics and Econometrics, Safety Research

View Paper: https://www.semanticscholar.org/paper/f02be07111b32071e96ea1e5bf4b93ec0ac2729d

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Citations in the corpus

Competition in the Workplace: An Experimental Investigation (2012, methodology): “Our setup builds on Abeler et al.'s (2010) study which analyzes the e ects of di erent payment regimes in a reversed gift-exchange game. The authors compare two di erent treatments called Individual-Wage Treatment and Equal-Wage Treatment to analyze the impact of possible norm violations on the aver”
Do Wage Cuts Damage Work Morale? Evidence from a Natural Field Experiment (2013, background): “(1993), Abeler et al. (2010), or Charness (2004)). However, the extent to which these results can be generalized to naturally occurring markets is not clear (see DellaVigna (2009), Falk and Heckmann (2009) or Levitt and List (2007)). Laboratory experiments are generally characterized by a high level”
Lab Labor: What can Labor Economists Learn from the Lab? (2010, unknown): “This is the approach taken by Abeler et al (2009).”
Attitudes to Income Inequality: Experimental and Survey Evidence (2014, background): “Abeler et al. (2010) found, in a gift-exchange game, that equal wages lead to systematically lower levels of effort being furnished by workers than when the firm can decide to pay workers differently.”