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Do Self-Determined Wages Really Improve Employees Performance? Evidence from a Randomized Field Experiment

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  • Jeworrek, Sabrina
  • Mertins, Vanessa

Abstract

Recent laboratory evidence suggests that employees who have the extraordinary right to self-determine their wages perform better. By conducting a natural field experiment, we aim to test whether this policy actually has the predicted positive effects in a real-labor market. Employees were hired to file business reports for a half-day job. After one hour of working time, a random sample of employees was allowed to choose their own wage, whereas another control group was denied this right, while being paid the same wages as the first group. We find that performance is about 12% higher when employees self-determine their wage, whereas self-determined wages are about 20% higher . A last treatment group differed from the former only in that employees were aware that others have been granted this extraordinary right. Surprisingly, we observe here no performance decrease. An online follow-up survey reveals that the surprisingly high level of performance seems to be driven by individuals scoring high on agreeableness and wanting to prove to be trustworthy.

Suggested Citation

  • Jeworrek, Sabrina & Mertins, Vanessa, 2014. "Do Self-Determined Wages Really Improve Employees Performance? Evidence from a Randomized Field Experiment," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100462, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc14:100462
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    References listed on IDEAS

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    1. Björn Bartling & Ernst Fehr & Holger Herz, 2014. "The Intrinsic Value of Decision Rights," Econometrica, Econometric Society, vol. 82, pages 2005-2039, November.
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    3. Emmanuelle Auriol & Régis Renault, 2008. "Status and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 305-326, March.
    4. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    5. repec:dau:papers:123456789/12479 is not listed on IDEAS
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    Cited by:

    1. Lara Ezquerra & Joaquin Gomez-Minambres & Natalia Jiminez & Praveen Kujal, 2021. "Making it public: The effect of (private and public) wage proposals on efficiency and income distribution," Working Papers 21-12, Chapman University, Economic Science Institute.
    2. Jörg Franke & Ruslan Gurtoviy & Vanessa Mertins, 2014. "Workers' Participation in Wage Setting and Opportunistic Behavior: Evidence from a Gift-Exchange Experiment," IAAEU Discussion Papers 201407, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    3. Mertins Vanessa & Albert Max, 2015. "Does Participation Increase Outcome Acceptance? Evidence from a Power-to-take Experiment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(6), pages 584-607, December.

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    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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