Arbeitspapier
The Hidden Costs of Choice in the Labor Market
Freedom of choice is often thought to improve efficiency. We experimentally investigate the effect of giving workers a choice between compensation schemes with and without a CSR component (CSR/NoCSR) on labor market participation decision and work performance, compared to the alternative of exogenous assignment. Classical economic theory suggests that giving workers a choice should not reduce their performance. Our results show that there are hidden costs associated with the right of choice. When a worker is allowed to choose his or her compensation scheme, the labor market participation rate is significantly lower than when the same scheme is exogenously assigned. Work quality is also significantly lower for those who choose CSR, as well as for those who choose no CSR, than for those who are exogenously assigned to the same scheme.We propose a model of signaling with image concerns to explain why the freedom of choice may induce reduced participation and effort exertion of workers.
- Language
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Englisch
- Bibliographic citation
-
Series: IZA Discussion Papers ; No. 16623
- Classification
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Wirtschaft
Corporate Culture; Diversity; Social Responsibility
Labor Economics: General
Personnel Economics: Compensation and Compensation Methods and Their Effects
- Subject
-
choice
signaling
image concerns
corporate social responsibility
labor
experiment
- Event
-
Geistige Schöpfung
- (who)
-
Au, Pak Hung
Li, King King
Zhang, Qing
Zhu, Rong
- Event
-
Veröffentlichung
- (who)
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Institute of Labor Economics (IZA)
- (where)
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Bonn
- (when)
-
2023
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Au, Pak Hung
- Li, King King
- Zhang, Qing
- Zhu, Rong
- Institute of Labor Economics (IZA)
Time of origin
- 2023
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