Wage negotiations and strategic responses to transparency

P. Werner*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper experimentally investigates how exogenous and endogenous wage transparency affect the interactions between employers and employees in a labor environment charac-terized by gift exchange. After the first part of the experiment in which wage offers always remain private information, three treatments in the second part either make wages fully transparent or leave the choice to establish (costly) wage transparency either to employ-ees or employers. When full transparency is induced exogenously, the share of equal wage offers increases in the second part. At the same time, employers and employees rarely in-duce wage transparency themselves. Moreover, in the treatment where employees could enforce transparency, average wage offers and performance are significantly lower than in the other treatments. Results from a control treatment indicate that employees' requests for wage information are cost-sensitive. If information about co-employees' wage offers is costless, employees almost always ask for this information, thus achieving nearly full wage transparency. Further analyses reveal that wage offers in the second part seem to be higher under transparency than under non-transparency of wage offers.(c) 2023 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license ( http://creativecommons.org/licenses/by/4.0/ )
Original languageEnglish
Pages (from-to)161-175
Number of pages15
JournalJournal of Economic Behavior & Organization
Volume209
DOIs
Publication statusPublished - 1 May 2023

JEL classifications

  • d04 - "Microeconomic Policy: Formulation; Implementation; Evaluation"
  • d63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
  • j31 - "Wage Level and Structure; Wage Differentials"
  • m52 - Personnel Economics: Compensation and Compensation Methods and Their Effects

Keywords

  • Wage transparency
  • Wage negotiations
  • Relative pay
  • Real effort
  • Gift exchange
  • PAY
  • LABOR
  • COMMUNICATION
  • INEQUALITY
  • FAIRNESS
  • WORK

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