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Do wage cuts damage work morale? Evidence from a natural field experiment


Maréchal, Michel; Kube, Sebastian; Puppe, Clemens (2013). Do wage cuts damage work morale? Evidence from a natural field experiment. Journal of the European Economic Association, 11(4):853-870.

Abstract

Employment contracts are often incomplete, leaving many responsibilitiessubject to workers’ discretion. High work morale is thereforeessential for sustaining voluntary cooperation and high productivity infirms. We conducted a field experiment to test whether workers reciprocatewage cuts and raises with low or high work productivity. Wagecuts had a detrimental and persistent impact on productivity, reducingaverage output by more than 20 percent. An equivalent wage increase,however, did not result in any productivity gains. The results from anadditional control experiment with high monetary performance incentivesdemonstrate that workers could still produce substantially moreoutput, leaving enough room for positive reactions. Altogether, theseresults provide evidence consistent with a model of reciprocity, as opposedto inequality aversion.

Abstract

Employment contracts are often incomplete, leaving many responsibilitiessubject to workers’ discretion. High work morale is thereforeessential for sustaining voluntary cooperation and high productivity infirms. We conducted a field experiment to test whether workers reciprocatewage cuts and raises with low or high work productivity. Wagecuts had a detrimental and persistent impact on productivity, reducingaverage output by more than 20 percent. An equivalent wage increase,however, did not result in any productivity gains. The results from anadditional control experiment with high monetary performance incentivesdemonstrate that workers could still produce substantially moreoutput, leaving enough room for positive reactions. Altogether, theseresults provide evidence consistent with a model of reciprocity, as opposedto inequality aversion.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2013
Deposited On:16 Feb 2012 07:40
Last Modified:05 Apr 2016 15:24
Publisher:Wiley-Blackwell
ISSN:1542-4766 (P) 1542-4774 (E)
Publisher DOI:https://doi.org/10.1111/jeea.12022
Related URLs:http://www.zora.uzh.ch/51506/
http://www.eeassoc.org/index.php?page=55
Other Identification Number:merlin-id:4163

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