Huck, S. and Seltzer, J. and Wallace, B. (2004) Deferred compensation and gift exchange: an experimental investigation into multi-period labor markets. (ELSE Working Papers 87). ESRC Centre for Economic Learning and Social Evolution: London, UK.
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Abstract
This paper examines the relationship between firms’ wage offers and workers’ supply of effort using a three-period experiment. In equilibrium, firms will offer deferred compensation: first period productivity is positive and wages are zero, while third period productivity is zero and wages are positive. The experiment produces strong evidence that deferred compensation increases worker effort; in about 70 percent of cases subjects supplied the optimal effort given the wage offer, and there was a strong effort response to future-period wages. We also find some evidence of gift exchange; worker players increased the effort levels in response to above equilibrium wage offers by a human, but not in response to similar offers by a computer. Finally, we find that firm players who are initially hesitant to defer compensation learn over time that it is beneficial to do so.
| Type: | Working / discussion paper |
|---|---|
| Title: | Deferred compensation and gift exchange: an experimental investigation into multi-period labor markets |
| Open access status: | An open access version is available from UCL Discovery |
| Publisher version: | http://else.econ.ucl.ac.uk/newweb/papers.php |
| Language: | English |
| UCL classification: | UCL > School of Arts and Social Sciences > Faculty of Social and Historical Sciences > Economics |
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