Author Abstract
Behavioral economists argue that above-market wages elicit reciprocity, causing employees to work harder-even in the absence of repeated interactions or strategic career concerns. In a field experiment with 266 employees, we show that paying above-market wages ($4), per se, does not have an effect on effort compared to a lower baseline wage ($3). However, structuring a portion of the wage as a clear and unexpected gift by hiring at a given wage, and then offering a raise with no strings attached after the employee has already accepted the contract ($3 + $1) does lead to persistently higher effort. Consistent with the idea that the recipient's interpretation of the wage as a gift is an important factor, we find that effects are strongest for employees with the most experience and those who have worked most recently-precisely the individuals who would recognize that this is a gift.
Paper Information
- Full Working Paper Text
- Working Paper Publication Date: September 2013
- HBS Working Paper Number: 14-030
- Faculty Unit(s): Negotiation, Organizations & Markets