Deferred Compensation and Gift Exchange : An Experimental Investigation into Multi-Period Labor Markets

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1193

Classification and Topics

• Classification: Wirtschaft ; Personnel Economics: Firm Employment Decisions; Promotions ; Labor Contracts ; Wage Level and Structure; Wage Differentials ; Design of Experiments: Laboratory, Individual ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: deferred compensation ; pensions ; experimental labor economics ; personnel economics ; gift exchange ; incentives ; shirking ; Vergütungssystem ; Betriebliche Altersversorgung ; Betriebliche Sozialleistungen ; Leistungsanreiz ; Anreizvertrag ; Spieltheorie ; Experiment ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Wallace, Brian ; Seltzer, Andrew J. ; Huck, Steffen
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/20439
• Last update: 10.03.2025, 11:42 AM CET