مقایسه اجتماعی و عملکرد: شواهد تجربی در مورد فرضیه دستمزد - تلاش عادلانه

Abstract We investigate the impact of wage comparisons for worker productivity. We present three studies which all use three-person gift-exchange experiments. Consistent with Akerlof and Yellen's (1990) fair wage–effort hypothesis we find that disadvantageous wage discrimination leads to lower efforts while advantageous wage discrimination does not increase efforts on average. Two studies allow us to measure wage comparison effects at the individual level. We observe strongly heterogeneous wage comparison effects. We also find that reactions to wage discrimination can be attributed to the underlying intentions of discrimination rather than to payoff consequences.

1. Introduction In a concept coined ‘fair wage–effort hypothesis’, Akerlof and Yellen (1990) stress the importance of fairness considerations for workers’ effort choices. In labor relations where effort is not perfectly contractible workers’ performance might depend on the perceived fairness of their salary. The core assumption of the fair wage–effort hypothesis is that workers compare their wage ww to the fair wage w*w*. Effort is assumed to be increasing in ww as long as a worker's wage falls short of w*w*; wage increases beyond w*w* do not increase effort further. In this paper, we investigate this hypothesis experimentally, using a three-person gift-exchange game as our work horse. There is by now a large body of experimental evidence showing the importance of reciprocity in social exchange situations. Starting with Fehr et al. (1993), the literature on gift-exchange experiments shows that on average the effort of experimental workers increases in the generosity of the wage offered by the employer.1 The existing experimental literature focuses largely on bilateral relations between an employer and a worker, or, in other words, on a ‘vertical’ comparison within a firm's hierarchy. Especially in real workplaces, however, it is most likely that Akerlof and Yellen's “fair wage” is to a large degree determined by ‘horizontal’ comparisons among employees. It is likely that people take their peers, that is, co-workers who are comparable to them, as a reference group for social comparisons (e.g., Falk and Knell, 2004 and Clark and Senik, 2010). If social comparisons are important for work morale, internal pay structures (including wages, fringe benefits, and other perks) are important for performance. In the words of Bewley (1999) who interviewed more than 300 personnel managers: “The main function of internal structure is to ensure internal pay equity, which is critical for good morale” (p. 82). 2 In this paper we investigate these morale effects using lab experiments. Laboratory experiments are suitable because they allow for the extensive control we need for answering our research questions (Falk and Heckman, 2009 and Croson and Gächter, 2010). We concentrate on wage effects and use a three-person gift-exchange game (one employer, two employees) to measure the influence of wage differences on efforts. As common in gift-exchange experiments, effort is costly for employees but higher efforts increase total welfare. We are in particular interested in observing ei(wi,wj)ei(wi,wj), where ei denotes worker i 's effort as a function of his or her own wage wiwi and the wage of a co-worker, wjwj. From previous experiments we predict that View the MathML sourceΔei/Δwi>0, that is, on average employees react reciprocally to their own wage (despite material incentives to choose minimal effort irrespective of wages). The three-person gift-exchange experiment allows a direct measurement of View the MathML sourceΔei/Δwj, that is, wage comparison effects—the average reaction of a worker's effort to an observed change in the co-worker's wage. Of particular interest for us are situations of ‘pure’ pay inequity, that is, inequitable situations that are not justified by situational differences, or differences in performance or merit, which equity theory (e.g., Adams, 1965 and Konow, 2000) would predict are acceptable. In the cases we study, unequal pay is simply wage discrimination. To answer our research question we conducted three studies. In Study 1 we use three-person gift-exchange games played in the usual sequential (direct response) mode. We repeat the basic three-person gift-exchange game eight times and randomly re-match groups of three players in each round. This is the simplest extension of the two-player game to allow for wage comparison effects. On average our experimental evidence supports Akerlof and Yellen's fair wage–effort hypothesis, if we assume that a worker takes the co-worker's wage as the reference wage. This assumption is plausible because in our experiment workers are identical, act in identical decision situations, and receive information only about their own and their current co-worker's wage. We find that experimental workers who face disadvantageous wage discrimination (that is, who are paid less than their colleague) significantly reduce their effort relative to a situation with equal wages. In Study 1 we focus on average wage comparisons. In Study 2 we look at individual differences in wage comparison. Heterogeneity is interesting for at least three reasons. First, the theoretical solutions of our three-person gift-exchange game with social preferences allow for a wide range of patterns (see Thöni, 2009). Second, also empirically, heterogeneity is to be expected in our environment, given what we know from previous research on social preferences (see, e.g., Fehr and Fischbacher, 2002 and Camerer and Fehr, 2006). Third, heterogeneity might also be a reason why some previous studies had difficulties finding wage comparison effects on the aggregate (e.g., Charness and Kuhn, 2007). If individual preferences go in different directions they might cancel each other out in the aggregate. Study 2 therefore investigates individual heterogeneity by using the strategy method to elicit effort reactions given all possible wage combinations. This has the advantage that we can elicit the entire wage–effort function, i.e., observe ei(wi,wj)ei(wi,wj) for each individual and all possible wage combinations, not just those that happen to arise under the direct response method. The results show that the average effort reaction is again consistent with the fair wage–effort hypothesis. Yet, the average masks a large degree of heterogeneity. We observe a great variety of wage comparison patterns and provide a classification. Finally, Study 3 explores whether wage comparison effects are due to intentional wage discrimination or due to payoff differences. This question is interesting, given recent evidence that fairness concerns are strongly influenced by perceived intentions (e.g., Falk et al., 2008). To test for the role of intentions we conduct an experiment where a random device chooses the wages. Thus, employers are not responsible for discriminatory wage arrangements. We find that the employer's intention to discriminate wages rather than mere payoff consequences triggers the wage comparison effects. We see our experimental approach as complementary to other, more conventional empirical methods. The existing empirical studies paint a mixed picture about the consequences of wage inequality.3 We use laboratory experiments to cleanly isolate wage comparison effects from other confounding factors such as differential productivities and abilities. Our design allows us to observe morale effects directly.4 Moreover, if wage comparison effects are behaviorally important and can have negative morale effects as suggested by Bewley's quote, we might not be able to observe wage comparison effects easily in the field because naturally occurring wage structures are already designed to avoid negative morale effects. Thus, experiments allow us to investigate the counterfactual, which helps us to understand the importance of internal wage structures. Our paper contributes to a nascent experimental literature on pay comparison effects.5 An early paper by Güth et al. (2001) investigates a trilateral principal-agent game where the two workers differ in productivity. The principal offers two separate contracts to the two workers. The treatment variable is the information workers receive about the contract of the other worker. The results show that contractual conditions are less asymmetric when workers can observe each others’ contracts. Cabrales and Charness (2000) get a comparable result in a framework with asymmetric information (the principal does not know the type of his two agents). Our paper differs from these studies because our focus is not on contract design but on the agents’ behavior. Charness and Kuhn (2007) lies closer to our goals. In contrast to Güth et al. (2001) they ran three-person gift-exchange games where experimental workers differ in their productivities. They do not find systematic wage comparison effects.6Clark et al. (2010) study bilateral gift-exchange games where workers learn the attractiveness of their work contract relative to other contracts in the market. They show that the rank of the own wage within the wages in the observed contracts significantly influences efforts. Abeler et al. (forthcoming) look at a situation in which equality can also be unfair. To achieve this, they change the order of moves: agents first choose their efforts and the principal then decides (in one treatment) whether to pay equal or unequal wages (in a control treatment the principal is forced to pay equal wages). The results support equity theory, which in their case, often predicts unequal wages due to unequal efforts.7 Our study differs in two important aspects from all previous studies. Firstly, in our setup workers are employed by the same firm and they are ex ante in identical positions because they do not differ in their productivity at the time wages are set. Secondly, we are interested in individual heterogeneity and therefore offer two further experiments that allow us to discuss inter-individual differences.

6. Concluding remarks The results from laboratory experiments reported in this paper support the view that wage comparison is an important determinant for a worker's effort decision. We find strong wage comparison effects both in the three-person gift-exchange game in the direct response mode (Study 1) and when we use the strategy method (Study 2). Consistent with Akerlof and Yellen's fair wage–effort hypothesis (Akerlof and Yellen, 1990) we observe in both Study 1 and Study 2 that paying a worker less than his co-worker leads to a decrease in effort relative to a situation with equal wages. Paying a worker more than a co-worker does not increase effort levels on average. Study 3 revealed that the overall wage comparison effects are due to an aversion to intentional wage discrimination, and not due to resulting payoff differences. Study 3 not only showed the importance of intentions for reactions to wage discrimination but also for the strength of gift exchange. A main result of our paper is that there is a large degree of individual heterogeneity in our data. We observe several patterns: some workers do not react at all to changes in the co-worker's wage, some increase or decrease their effort for changes in the co-worker's wage, and a fourth category chooses highest effort whenever the two wages are equal. Despite the high degree of heterogeneity, the observed wage comparison effects are clearly not random. In the case of advantageous wage discrimination the heterogeneous effects seem to counterbalance each other, leading to no systematic overall effect. In case of disadvantageous wage inequality the overall effect is clearly negative. We see our experiment as a test for the existence of wage comparison effects: subjects in the role of the worker have no information about the reasons for wage discrimination and they take their decision under anonymity. We conjecture that our laboratory measure of wage comparison effects provide a lower bound for the importance of wage comparison effects in more naturally occurring environments. This conclusion is suggested by a recent field experiment by Cohn et al. (2009) who, consistent with our findings, report strong behavioral reactions to wage inequality.