The labor supply of fixed-wage workers: Estimates from a real effort experiment

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 9778 February 2016 ABSTRACT The Labor Supply of Fixed-Wage Workers: Estimates from a Real Effort ExperimentFixed-wage workers comprise the bulk of the labor force and yet little is known about how they respond to wage changes. Given recent interest in theories of reciprocity and intrinsic motivation and their implications for effort provision, the neoclassical prediction seems less obvious today. To better understand the motivation of these workers, I estimate their labor supply using a real effort experiment. Two results stand out. First, no one theory seems to fit the pooled data. On average, people work considerably harder than the minimum but they do not respond to changes in the wage. Second, pooling the data is deceptive because there seem to be distinct types with differing responses to the wage. Most workers can be classified as reciprocal or intrinsically motivated and, indeed, these types respond as theory would predict: reciprocators return wage gifts with increased effort and extrinsic incentives crowd out motivation for intrinsic workers.JEL Classification: C91, J22

The Effectiveness of Incentive Schemes in the Presence of Implicit Effort Costs

“…What are the determinants of effort provision, and how to incentivize agents to exert high effort? Most studies addressing these questions usually focus on the compensation side, investigating effort responses to fixed and variable wages (Lazear, 2000;Carpenter, 2016), fair wages (Cohn et al, 2015), or other contractual details of the incentive scheme (Winter, 2004;Herweg et al, 2010;Goerg et al, 2010). Yet, agents' behavior also depends on additional non-monetary features of the work environment.…”

The Magic of the Personal Touch: Field Experimental Evidence on Money and Appreciation as Gifts*

“…Recently, authors have begun to dig deeper into factors that affect reciprocity. For example, Gilchrist et al (2016) have studied the importance of the salience of wage gifts, Al-Ubaydli et al (2010) have looked at the interaction of reciprocity with reputational concerns, and Carpenter (2016) have focused on the existence of different types of agents (those who reciprocate and those who are motivated by intrinsic motivation). 6 This scarcity of literature on unconditional non-financial gifts stands in contrast to the growing body of literature on non-financial rewards as incentives (which are conditional on performance).…”

“…Falk (2007) and Brock et al (2018) have also used gifts in kind (books inscribed with a thank you message and postcards with children's drawings on them) to elicit reciprocity. In general, gifts can also affect recipients' intrinsic motivation to work (e.g., Carpenter, 2016). 8 Exceptions are McCullough et al (2001) and Grant and Gino (2010) in social psychology who show that gratitude motivates individuals to engage in pro-social behavior, and Kirchler and this paper, we include both a financial gift and a gift free of material value in the form of gratitude and appreciation, as well as gifts that combine both elements.…”

“…() have studied the importance of the salience of wage gifts, Al‐Ubaydli et al . () have looked at the interaction of reciprocity with reputational concerns, and Carpenter () have focused on the existence of different types of agents (those who reciprocate and those who are motivated by intrinsic motivation).…”

“…() have also used gifts in kind (books inscribed with a thank you message and postcards with children's drawings on them) to elicit reciprocity. In general, gifts can also affect recipients’ intrinsic motivation to work (e.g., Carpenter, ).…”