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Wage Secrecy as a Social Convention

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  • Danziger, Leif
  • Katz, Eliakim

Abstract

Despite the general belief that a free flow of information enhances efficiency, social convention appears to call for secrecy regarding individuals' wages. This paper provides an explanation for this convention. The authors suggest that the role of wage secrecy is to reduce effective labor mobility and thereby enhance the feasibility of risk-shifting contracts. Wage secrecy may yield a mix of mobility and risk shifting that is superior both to a spot market for labor and to a social convention that binds workers to their employers. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Danziger, Leif & Katz, Eliakim, 1997. "Wage Secrecy as a Social Convention," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 59-69, January.
    • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:1:p:59-69
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    1. repec:bla:ecinqu:v:51:y:2013:i:3:p:1779-1794 is not listed on IDEAS
    2. Bartling, Björn & von Siemens, Ferdinand A., 2010. "The intensity of incentives in firms and markets: Moral hazard with envious agents," Labour Economics, Elsevier, vol. 17(3), pages 598-607, June.
    3. Schneck, Stefan, 2014. "My Wage is Unfair! Just a Feeling or Comparison with Peers?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(3), pages 245-273.
    4. David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October.
    5. Cullen, Zoë & Perez-Truglia, Ricardo, 2023. "The salary taboo privacy norms and the diffusion of information," Journal of Public Economics, Elsevier, vol. 222(C).
    6. Marlene Kim, 2015. "Pay Secrecy and the Gender Wage Gap in the United States," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(4), pages 648-667, October.
    7. Cobo-Reyes, Ramón & Lacomba, Juan A. & Lagos, Francisco & Levin, Dan, 2017. "The effect of production technology on trust and reciprocity in principal-agent relationships with team production," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 324-338.
    8. David Card & Alex Mas & Enrico Moretti & Emmanuel Saez, 2010. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," Working Papers 1269, Princeton University, Department of Economics, Industrial Relations Section..
    9. Contreras Oscar F. & Giorgio Zanarone, 2018. "Managing Social Comparison Costs in Organizations," Working Papers 2018-25, Banco de México.
    10. Gary Charness & Peter Kuhn, 2005. "Pay Inequality, Pay Secrecy, and Effort: Theory and Evidence," NBER Working Papers 11786, National Bureau of Economic Research, Inc.
    11. Tomer Blumkin & David Lagziel, 2019. "Pay Secrecy In Labor Markets With Matching Frictions," Working Papers 1903, Ben-Gurion University of the Negev, Department of Economics.
    12. Matthew Caulfield, 2021. "Pay Secrecy, Discrimination, and Autonomy," Journal of Business Ethics, Springer, vol. 171(2), pages 399-420, June.
    13. Gary Charness & Peter Kuhn, 2007. "Does Pay Inequality Affect Worker Effort? Experimental Evidence," Journal of Labor Economics, University of Chicago Press, vol. 25(4), pages 693-723.
    14. Daniele Nosenzo, 2012. "Pay Secrecy and effort provision," Discussion Papers 2012-13, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    15. Daniele Nosenzo, 2010. "The Impact of Pay Comparisons on Effort Behavior," Discussion Papers 2010-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    16. Astrid Haider & Ulrike Schneider, 2010. "The Influence Of Volunteers, Donations And Public Subsidies On The Wage Level Of Nonprofit Workers: Evidence From Austrian Matched Data," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 81(1), pages 1-20, March.
    17. Charness, Gary & Kuhn, Peter J., 2004. "Do Co-Workers’ Wages Matter? Theory and Evidence on Wage Secrecy, Wage Compression and Effort," IZA Discussion Papers 1417, Institute of Labor Economics (IZA).
    18. Tomer Blumkin & David Lagziel, 2019. "Relative Ambition And The Role Of Wage Secrecy In Labor Contracts," Working Papers 1902, Ben-Gurion University of the Negev, Department of Economics.

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