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Wage negotiations and strategic responses to transparency

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  • Werner, Peter

Abstract

This paper experimentally investigates how exogenous and endogenous wage transparency affect the interactions between employers and employees in a labor environment characterized 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 employees 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 induce 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.

Suggested Citation

  • Werner, Peter, 2023. "Wage negotiations and strategic responses to transparency," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 161-175.
    • Handle: RePEc:eee:jeborg:v:209:y:2023:i:c:p:161-175
    DOI: 10.1016/j.jebo.2023.02.024
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    Cited by:

    1. Oliver Gürtler & Lennart Struth, 2021. "Do Workers Benefit from Wage Transparency Rules?," ECONtribute Discussion Papers Series 105, University of Bonn and University of Cologne, Germany.
    2. Werner, Peter, 2024. "On common evaluation standards and the acceptance of wage inequality," Games and Economic Behavior, Elsevier, vol. 145(C), pages 137-156.

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    More about this item

    Keywords

    Wage transparency; Wage negotiations; Relative pay; Real effort; Gift exchange;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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