estimation of social preferences in generalized dictator games abstract to statistically infer the motives underlying pro social behavior econometric models of choice are required such inference is comparable across studies if the choice model yields estimates that are precise in sample and robust out of sample analyzing two extensive dictator game data sets i find that structural models of choice prevent significant overfitting contrary to regression models structural models with generalized error structure fit the choice pattern and random utility models yield robust identification of subject types contrary to random behavior and random taste models the random utility model for ordered alternatives provides robust estimates across games and is therefore suited for analyses

by force of demand explaining international comovements abstract this paper explores the possibility that economic fluctuations may be largely demand driven it is shown that the stylized open economy business cycle regularities documented by feldstein and horioka 1980 the economic journal 90 june 314 329 and backus et al 1992 journal of political economy 100 4 745 775 can be explained by demand shocks alone even in a standard general equilibrium model frictions such as market incompleteness increasing returns to scale and sticky prices do not appear to be the preconditions for resolving these long standing puzzles

managerial bonuses and subordinate mistreatment abstract can performance bonuses increase the likelihood that managers coerce their subordinates into exerting high levels of effort when doing so promotes neither efficiency nor equity we consider a laboratory setting in which managers compete to obtain a large bonus at the end of the experiment and the probability of obtaining it depends partly on the effort exerted by the subordinates we find that managers are more than twice as likely to punish subordinates exerting fair levels of effort if they compete for individual bonuses than when there are no bonuses this is not the case when they compete for pooled bonuses giving managers discretionary power over how to share them with their subordinates as most subordinates willingly exert maximal effort a model in which individuals are assumed to care about equity captures subordinates behavior well managers willingness to coerce subordinates into exerting unfairly high levels of effort on the other hand cannot be readily accounted for by any of the existing models of social preferences

representative trust and reciprocity prevalence and determinants this paper provides evidence about the determinants of trust and reciprocal inclinations that is a tendency for people to respond in kind to hostile or kind actions in a representative setting we investigate the prevalence of reciprocity in the population the correlation between trust and positive and negative reciprocal inclinations within person the individual determinants of reciprocity and the relationship with psychological measures of personality we find that most people state reciprocal inclinations in particular in terms of positive reciprocity as well as substantial heterogeneity in the degree of trust and reciprocity trust and positive reciprocity are only weakly correlated while trust and negative reciprocity exhibit a negative correlation in terms of determinants being female and increasing age are associated with stronger positive and weaker negative reciprocal tendencies taller people are more positively reciprocal but height has no impact on negative reciprocity psychological traits also affect trust and reciprocity jel d63 j3 j6

gift exchange and the separation of ownership and control abstract numerous gift exchange experiments have found a positive wage effort relationship in almost all these experiments the employer both owns and controls the firm this paper explores to what extent the separation of ownership and control affects the wage effort relationship we compare the standard bilateral gift exchange game between an owner manager and a worker with two trilateral ones where the firm is owned by a shareholder and controlled by a manager the wage effort relationship is similar in all three situations most strikingly workers reward higher wages with higher effort even when the manager does not share in the firm s profits

fair wages and effort provision combining evidence from a choice experiment and a field experiment the presence of workers who reciprocate higher wages with greater effort can have important consequences for firms and labor markets knowledge about the extent and determinants of reciprocal effort choices is however incomplete we investigate the role of fairness perceptions and social preferences in a field experiment in which workers were hired for a one time job we show that workers who perceive being underpaid at the base wage increase their performance if the hourly wage increases whereas those who feel adequately paid or overpaid at the base wage do not change their performance moreover we find that only the workers who display reciprocity in a choice experiment show reciprocal effort responses in the field the workers who lack reciprocity in the choice experiment do not respond to the wage increase even if they feel underpaid at the base wage our findings suggest that fairness perceptions and social preferences are key in workers performance response to wage increases in our study the wage increase affects effort mainly through the removal of perceived unfairness i e the elimination of negative reciprocity toward the firm rather than positive reciprocity these results are the first direct evidence of the fair wage effort hypothesis in the field and also help interpret previous contradictory findings in the literature data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1970 this paper was accepted by uri gneezy behavioral economics

what makes growth sustained abstract we identify structural breaks in economic growth in 140 countries and use these to define growth spells periods of high growth preceded by an upbreak and ending either with a downbreak or with the end of the sample growth spells tend to be shorter in african and latin american countries than elsewhere we find evidence that growth duration is positively related to the degree of equality of the income distribution democratic institutions export orientation with higher propensities to export manufactures greater openness to fdi and avoidance of exchange rate overvaluation favorable for duration and macroeconomic stability

strikes scabs and tread separations labor strife and the production of defective bridgestone firestone tires this paper provides a case study of the effect of labor relations on product quality we consider whether a long contentious strike and the hiring of permanent replacement workers by bridgestone firestone in the mid 1990s contributed to the production of an excess number of defective tires using several independent data sources we find that labor strife in the decatur plant closely coincided with lower product quality count data regression models based on two data sets of tire failures by plant year and age show significantly higher failure rates for tires produced in decatur during the labor dispute than before or after the dispute or than at other plants also an analysis of internal firestone engineering tests indicates that p235 tires from decatur performed less well if they were manufactured during the labor dispute compared with those produced after the dispute or compared with those from other non striking plants monthly data suggest that the production of defective tires was particularly high around the time wage concessions were demanded by firestone in early 1994 and when large numbers of replacement workers and permanent workers worked side by side in late 1995 and early 1996

strike coordination and dismissal in uniform wage settings abstract we study a gift exchange game with 12 employees and one employer when the employer can offer individually differentiated wages in a setting without collective action we observe high levels of wages effort choices and total earnings when the employer is restricted to offering a uniform wage trust and reciprocity drop dramatically due to widespread shirking the stepwise introduction of two collective action mechanisms strike and coordination increases the employees share of the total earnings but does not mitigate the free riding problem adding employment risk to the collective action setup drives up wages reduces free riding and leads to higher total earnings however this increase in productivity is not sufficient to achieve the high levels of wages efforts and earnings that we observe with individually differentiated wages

tax aversion in labor supply abstract in a real effort laboratory experiment labor supply decreases more with the introduction of a tax than with a financially equivalent drop in wages this tax aversion is large in magnitude when we decompose the productivity decrease that arises from taxation we estimate that 40 is due to the lower net wage and the remaining 60 to tax aversion this tax aversion affects labor supply more on the extensive margin working less than on the intensive margin being less productive while working the aversion is equally strong whether tax revenue goes to the u s government or back to the experimenter a laboratory tax we discuss the implications of our results for the relationship between labor supply and taxation

demand shocks and economic fluctuations this paper studies conditions under which demand side shocks can generate realistic business cycles in rbc models although highly persistent demand shocks are necessary for generating procyclical investment variable capacity utilization and habit formation can reduce the required degree of persistence

a business cycle model with variable capacity utilization and demand disturbances abstract we develop a dynamic general equilibrium model with demand preference shocks estimated using hall s j labour economics 15 1997 223 residual that replicates u s business cycles well at least compared to the real business cycle models the key factor is cyclical capital utilization which is based on imperfect competition slow adjustments in capital stock and fixed requirement of labor input we also demonstrate theoretically that a representative agent economy with preference shocks could be viewed as the reduced form of a heterogeneous agents economy with incomplete markets specifically a heterogeneous agents economy with incomplete markets is aggregated into a representative agent economy with preference shocks this result would provide a microeconomic foundation for preference shock models it is also shown that a shock to marginal utility of consumption and a shock to marginal disutility of labor have different effects

do reputation feedback systems really improve trust among anonymous traders an experimental study feedback systems are claimed to be a crucial component of the success of electronic marketplaces like ebay or amazon marketplace this article aims to compare the effects of various feedback systems on trust between anonymous traders through a set of experiments based on the trust game our results indicate that trust is significantly improved by the introduction of a reputation feedback system however such mechanisms are far from being perfect and are vulnerable to strategic ratings and reciprocation our findings indicate that some changes in rating rules may significantly improve the efficiency of feedback systems by avoiding strategic rating or reciprocation and hence stimulate trust and trustworthiness among traders in particular a system in which individuals are not informed of their partner s rating decision before making their own decision provides better results both in terms of trust and earnings

structural change the real exchange rate and the balance of payments in mexico 1960 2012 this paper estimates a structural model of the balance of payments with disaggregated exports manufactures and other and imports final and intermediate and a reduced form model of the trade balance for the mexican economy the analysis identifies structural changes in the composition of mexico s trade and the parameters that affect it across five subperiods marked by statistical breakpoints the results indicate that a tightening of the balance of payments constraint may account for the post liberalization slowdown in mexico s growth only during certain subperiods and that the impact of real exchange rate changes on the trade balance has diminished most likely as a result of the increasing integration of export industries into global supply chains the results also suggest an asymmetry whereby a country cannot sustain growth above the rate consistent with balance of payments equilibrium as expected but it can grow persistently below that rate when other constraints are more binding

pay reference points and police performance several theories suggest that pay raises below a reference point will reduce job performance final offer arbitration for police unions provides a unique opportunity to examine these theories as the police officers either receive their requested wage or receive a lower one in the months after new jersey police officers lose in arbitration arrest rates and average sentence length decline and crime reports rise relative to when they win these declines in performance are larger when the awarded wage is further from the police union s demand the findings support the idea that considerations of fairness disappointment and more generally reference points affect workplace behavior

social comparison and effort provision evidence from a field experiment social comparison has potentially far reaching consequences in many economic domains we conducted a field experiment to examine how social comparison affects workers effort provision if their own wage or that of a co worker is cut workers were assigned to groups of two performed identical individual tasks and received the same performance independent hourly wage cutting both group members wages caused a decrease in performance but when only one group member s wage was cut the affected workers decreased their performance more than twice as much as when both workers wages were cut this finding indicates that social comparison among workers affects effort provision because the only difference between the two wage cut treatments is the other group member s wage level in contrast workers whose wage was not cut but who witnessed their group member s pay being cut displayed no change in performance relative to the baseline treatment in which both workers wages remained unchanged this indicates that social comparison exerts asymmetric effects on effort jel c93 j33 m53

the dynamism of mexican exports lost in chinese translation summary this paper analyzes the extent to which mexican exports have penetrated us markets in recent years and juxtaposes such an analysis with the performance of china we find that mexico s main non oil exports are losing dynamism and their relative share in the us market is either declining or growing slower than china s this trend is a new one and begins after china s entry into the wto a number of factors could explain these findings these include i the real appreciation of the real exchange rate of the peso relative to the us dollar combined with the trend toward undervaluation of the chinese currency ii the decline of public investment in mexico especially in infrastructure iii limited access to bank credit in mexico and iv the absence of government policy in mexico to help spur technological innovation and to strengthening its domestic backward and forward linkages

gift giving and worker productivity evidence from a firm level experiment abstract we present results from a field experiment designed to measure worker response to a monetary gift from their employer the experiment took place inside a tree planting firm paying its workforce incentive contracts firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity we compare planter productivity the number of trees planted per day on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block and thus under similar planting conditions we find direct evidence that the gift had a significant and positive effect on daily planter productivity controlling for planter fixed effects weather conditions and other random daily shocks

fair wages and effort evidence from a field experiment the presence of workers who reciprocate higher wages with greater effort can have important consequences for firms and labor markets knowledge about the extent and determinants of reciprocal effort choices is however incomplete we investigate the role of fairness perceptions and social preferences in a field experiment in which workers were hired for a one time job we show that workers who perceive being underpaid at the base wage increase their performance if the hourly wage increases whereas those who feel adequately paid or overpaid at the base wage do not change their performance moreover we find that only the workers who display reciprocity in a choice experiment show reciprocal effort responses in the field the workers who lack reciprocity in the choice experiment do not respond to the wage increase even if they feel underpaid at the base wage our findings suggest that fairness perceptions and social preferences are key in workers performance response to wage increases in our study the wage increase affects effort mainly through the removal of perceived unfairness i e the elimination of negative reciprocity toward the firm rather than positive reciprocity these results are the first direct evidence of the fair wage effort hypothesis in the field and also help interpret previous contradictory findings in the literature

macroeconomic fluctuations and the allocation of time what are the fundamental driving forces of macroeconomic fluctuations in particular why do people spend more time working in booms and less in recessions these are basic questions of macroeconomics recent thinking has emphasized technology shifts preference shifts and changes in government purchases as likely driving forces it is useful to distinguish atemporal and intertemporal effects of the driving forces under standard assumptions the technology shift has no effect through atemporal channels because income and substitution effects exactly offset a straightforward decomposition of movements of employment attributes most of them to the atemporal effects of preference shifts

external shocks structural change and economic growth in mexico 1979 2007 summary this article finds that shocks to net financial inflows world oil prices the us growth rate and the lagged real exchange rate explain most of the fluctuations in mexico s annual growth since 1979 the article also estimates how the effects of these external constraints have changed since mexico s liberalization policies of the late 1980s and the formation of nafta in 1994 estimates of an investment function and other tests show that growth drives investment but not conversely in the short run investment is driven mainly by oil prices and the accelerator effect foreign direct investment has no significant impact 2008 elsevier ltd all rights reserved

indeterminacy aggregate demand and the real business cycle abstract we show that under indeterminacy aggregate demand shocks are able to explain not only aspects of actual fluctuations that standard rbc models predict fairly well but also aspects of actual fluctuations that standard rbc models cannot explain such as the hump shaped trend reverting impulse responses to transitory shocks found in us output cogley and nason am econom rev 85 1995 492 the large forecastable movements and comovements of output consumption and hours rotemberg and woodford am econom rev 86 1996 71 and the fact that consumption appears to lead output and investment over the business cycle indeterminacy arises in our model due to capacity utilization and mild increasing returns to scale

trade liberalisation the peso and mexico s commodity trade flows with the united states abstract we assess the effects of real peso devaluations as well as the effects of gatt and nafta on mexico s in payments and out payments with the united states for 102 industries we find that relatively few trade flows are sensitive to changes in the real exchange rate probably due to production sharing and intra industry trade but devaluations affect mexican imports more than exports trade liberalisation has had a larger impact particularly on imports of intermediate goods and exports of certain manufactures many affected export industries are ones that have previously been shown to have economies of scale

wage subsidies and fair wages abstract wage subsidies can be provided directly to the worker or indirectly by subsidizing the employer with reduced cost of labor employers offer higher wages the standard literature stipulates that this statutory incidence bears no implications for the economic incidence we propose and test a mechanism by which indirect subsidies lead to higher social welfare studies show that workers reciprocate higher wages with higher effort indirect subsidies are shifted to the workers as higher wages leading workers to reciprocate with higher effort and productivity a controlled laboratory experiment supports our behavioral hypotheses and confirms the behavioral and welfare implications

in search of workers real effort reciprocity a field and a laboratory experiment we present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages work effort neither reacts to an increase of the own wage nor to a positive or negative peer comparison this result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort in an additional real effort laboratory experiment we show that explicit cost and surplus information that enables an exact calculation of an employer s surplus from the work contract is a crucial prerequisite for a positive wage effort relation this demonstrates that an employee s reciprocity requires a clear assessment of the surplus at stake jel c91 c92 j41

technical and structural change and the fall in the manufacturing output capital ratio in mexico 1990 2015 the article studies the fall in the manufacturing output capital oc ratio in mexico in the post trade liberalisation period 1990 2015 from a classical perspective a pattern of falling oc ratio rising labour productivity and greater capital intensity can be interpreted as a case of marx biased technical change a within between industry decomposition shows however that in mexico the fall in the average oc ratio reflects not only within industry technical change but also structural change in the form of a change in the composition of the capital stock towards industries with low or declining oc ratios econometric estimations moreover show that within industry technical change was not related to the initial level or change in domestic labour costs as in the dominant interpretation of the sources of marx biased technical change but was driven instead by mexico s industrial integration with the usa within industry technical change and convergence to us oc ratios dominated in an early phase but were replaced by structural change and divergence in a later phase following the china shock of the early 2000s irrespective of the source of change in the average oc ratio though both within industry technical change in the early phase and structural change in the late one tended to reduce the average profit rate in the mexican manufacturing sector

heterogeneous social preferences recent research has shown the usefulness of social preferences for explaining behavior in laboratory experiments this paper demonstrates that models of social preferences are particularly powerful in explaining behavior if they are embedded in a setting of heteroge neous actors with heterogeneous social preferences for this purpose a simple model is in troduced that combines the basic ideas of inequity aversion social welfare preferences recip rocity and heterogeneity this model is applied to 43 games and it can be shown that its pre dictive accuracy is clearly higher than that of the isolated approaches furthermore it can explain most of the anomalies the contradictions that are discussed in goeree and holt 2001

pensions reforms workforce ageing and firm provided welfare this paper investigates the impact of an exogenous increase in the legal retirement age on the firms propensity to provide welfare services voluntarily to their employees to this purpose we explo

contractual incompleteness unemployment and labor market segmentation this article provides evidence that involuntary unemployment and the segmentation of labour markets into firms offering good and bad jobs may both arise as a consequence of contractual incompleteness we provide a simple model that illustrates how unemployment and market segmentation may jointly emerge as part of a market equilibrium in environments where work effort is not third party verifiable using experimental labour markets that differ only in the verifiability of effort we demonstrate empirically that contractual incompleteness can cause unemployment and segmentation our data are also consistent with the key channels through which the model explains the emergence of both phenomena copyright 2014 oxford university press

exploring the robustness of the balance of payments constrained growth idea in a multiple good framework this paper derives the balance of payments constrained growth bpcg model as a special case of a three good framework that incorporates exportables importables and non tradables the conditions under which the canonical form of the bpcg rate can be derived are made explicit and the assumptions scrutinized it is shown that the presence of nontradables substitutability between exportables and importables and incomplete specialization in expenditure generally dampen the externallyconstrained growth rate these ndings help explain why empirical estimates tend to overestimate the bpcg rate overall our ndings underscore the observation that tests of the bpcg hypothesis are as much a test of the internal structure of the economy under consideration

volatility and welfare abstract this paper explores the relationship between volatility and welfare even though households prefer smooth streams of consumption and leisure welfare can be increasing in the volatility of an exogenous driving force if factor supply is sufficiently elastic we provide some analytical results for a model without capital and do some quantitative exercises in a model with capital and a variety of shocks welfare is greater in high shock volatility regimes under plausible parameter values augmenting the model with features that increase the elasticity of factor supply extends the range of parameters over which higher volatility results in greater welfare

carrots that look like sticks toward an understanding of multitasking incentive schemes constructing compensation schemes for effort in multidimensional tasks is complex particularly when some dimensions are not easily observable when incentive schemes contractually reward workers for easily observed measures such as quantity produced the standard model predicts that unrewarded dimensions such as quality will be neglected yet there remains mixed empirical evidence in favor of this standard principal agent model prediction this article reconciles the literature using both theory and empirical evidence the theory outlines conditions under which principals can use a piece rate scheme to induce higher quantity and quality levels than analogous fixed wage schemes making use of a series of complementary laboratory and field experiments we show that this effect occurs because the agent is uncertain about the principal s monitoring ability and the principal s choice of a piece rate signals to the agent that she is efficient at monitoring

explaining gift exchange the limits of good intentions this paper explores the limitations of intention based social preferences as an explanation of gift exchange between a firm and a worker in a framework with one self interested and one reciprocal player gift giving never arises in equilibrium instead any equilibrium in a large class of multistage games must involve mutually unkind behavior of both players besides gift exchange this class of games also includes moral hazard models and the rotten kid framework even though equilibrium behavior may appear positively reciprocal in some of these games the self interested player never benefits from reciprocity we discuss the relation of these results to the theoretical and empirical literature on gift exchange in employment relations

an experimental study of asymmetric reciprocity abstract when deviating from best responses do people have a stronger propensity to increase or decrease other people s payoffs offerman 2002 finds that negative intentions are more likely to induce payoff decreases than positive intentions are to induce payoff increases using the falk and fischbacher 2006 model we approach the same question as offerman but from a structural angle this requires measuring what a subject predicts that other subjects predict that he will do known as a subject s second order expectations this permits us to interpret any asymmetry in the propensities to increase and decrease payoffs in terms of the determinants of payoff increases and decreases our results are largely consonant with offerman 2002 we also find that in situations with exogenously created inequity rather than inequity that is the result of an intentional action by an actor payoff increase is more likely to be used to diminish the inequity than is payoff decrease our results exhibit some sensitivity to whether we obtain second order expectations by eliciting them directly from the subject making the payoff increase decrease decision or by inducing them by reporting to the decider the expectations of the target of the payoff increase decrease

the many faces of human sociality uncovering the distribution and stability of social preferences there is vast heterogeneity in the human willingness to weigh others interests in decision making this heterogeneity concerns the motivational intricacies as well as the strength of other regarding behaviors and raises the question how one can parsimoniously model and characterize heterogeneity across several dimensions of social preferences while still being able to predict behavior over time and across situations we tackle this task with an experiment and a structural model of preferences that allows us to simultaneously estimate outcome based and reciprocity based social preferences we find that non selfish preferences are the rule rather than the exception neither at the level of the representative agent nor when we allow for several preference types do purely selfish types emerge instead three temporally stable and qualitatively different other regarding types emerge endogenously i e without pre specifying assumptions about the characteristics of types when ahead all three types value others payoffs significantly more than when behind the first type which we denote as strongly altruistic type is characterized by a relatively large weight on others payoffs even when behind and moderate levels of reciprocity the second type denoted as moderately altruistic type also puts positive weight on others payoff yet at a considerable lower level and displays no positive reciprocity while the third type is behindness averse i e puts a large negative weight on others payoffs when behind and behaves selfishly otherwise we also find that there is an unambiguous and temporally stable assignment of individuals to types moreover the three type model substantially improves the out of sample predictions of individuals behavior across additional games while the information contained in subject specific parameter estimates leads to no or only minor additional predictive power this suggests that a parsimonious model with three types captures the bulk of the predictive power contained in the preference estimates

burning money and pseudo first mover advantages an experimental study on forward induction abstract the mere potential for one player to burn money prior to play has been shown in theory to be an effective device to select this player s most preferred outcome e g in the battle of the sexes game j econ theory 48 1989 476 j econ theory 57 1992 36 in this study we assess the behavioral relevance of this theoretical claim it is shown that its validity depends on whether the game is played in extensive or normal form in extensive form games first movers benefit substantially from having the opportunity to burn money in advance the effect is much weaker in the normal form game however in two control treatments first movers who can select between two related games gain an advantage although standard forward induction arguments do not have any bite these results suggest that we need to make further theoretical advances to understand the role of physical timing and first mover advantages in games

temporal stability and psychological foundations of cooperation preferences abstract a core element of economic theory is the assumption of stable preferences we test this assumption in public goods games by repeatedly eliciting cooperation preferences in a fixed subject pool over a period of five months we find that cooperation preferences are very stable at the aggregate level and to a smaller degree at the individual level allowing us to predict future behavior fairly accurately furthermore our results provide evidence on the psychological foundations of cooperation preferences the personality dimension agreeableness is closely related to both the type and the stability of cooperation preferences

what field experiments have and have not taught us about managing workers this paper reviews the field experimental evidence on firm employee relationships there is strong evidence that output rises in response to financial incentives but more mixed support for worker reciprocity in response to employer generosity non financial approaches such as worker recognition or adding meaning to mundane tasks can also increase output social relations are central to how firms function and have been shown to have an important impact on the design of incentive schemes what we do not know however far exceeds that which we have learned a broad swathe of important topics including recruiting worker promotion and training are virtually untouched thus far by field experiments

cheat or perish a theory of scientific customs abstract performance incentives have become increasingly important in academia evidence suggest that they increase not only researchers effort but also their cheating we develop a principal agent framework in which a research institution principal aims to reward scientific productivity considering the social benefit of research and the remuneration costs researchers agents take into account what others are doing as a consequence the introduction of performance incentives not only leads to fraudulent behavior in the short run but may also deteriorate the scientific norm in the long run in the face of these dynamics the principal pursues two goals to increase productivity effort incentive policy and to deal with fraud anti fraud policy several factors determine the optimal mix of policies economic factors researchers cost of providing high or low effort the societal value of scientific knowledge and the societal costs of scientific misbehavior and psychological factors the evolution of norms over time an important insight of our theory is that when research institutions seek to encourage the production of high quality research they should also raise the salary for normal research to avoid misconduct

if wages fell during a recession abstract many economies exhibit downward wage rigidity surveys of managers indicate that employers hold wages rigid because they believe morale will suffer after a wage cut otherwise there is little evidence for how employers beliefs contribute to wage rigidity and whether those beliefs are accurate using an experiment we demonstrate that effort falls after workers experience a wage cut despite this partial confirmation of the bewley 1999 morale theory half of the employers in our experiment cut wages and lose money as a result under nominal inflation real wage cuts do not have a significant effect on effort

the relevance of equal splits in ultimatum games abstract in this note we present a slightly altered version of the mini ultimatum game of g e bolton and r zwick 1995 games econ behav 10 95 121 more specifically we replaced exactly equal splits by nearly equal splits either slightly favoring the proposer or the responder such a minor change should not matter if behavior was robust we find however a significant change in behavior fair offers occur less often when equal splits are replaced by nearly equal splits journal of economic literature classification numbers c72 c78 c92

crowding out in the labor market a prosocial setting is necessary recent studies mostly from prosocial settings suggest that monetary rewards may crowd out effort exertion by economic agents we design a field experiment with data entry workers to investigate the extent of such crowding out effects in a labor market using simple variations in the job description of a task we induce a natural work setting under the work frame and emphasize social preference under the social frame we find that crowding out of labor participation critically depends on framing whereas small monetary rewards reduce the participation rate under the social frame the participation rate is nondecreasing in the wage rate under the work frame moreover among the workers who participate in the task those who receive a positive wage perform a considerably higher amount of work than those who are paid zero wage under either frame thus there is weak evidence of crowding out only when the task is explicitly given a prosocial flavor and not under a regular work setting furthermore emphasizing social preference in the labor market in such a way reduces the overall labor supply and seems to have an adverse effect on the quality of work data as supplemental material are available at http dx doi org 10 1287 mnsc 2013 1807 this paper was accepted by john list behavioral economics

real exchange rate levels and economic development theoretical analysis and econometric evidence according to the development approach to exchange rates competitive currencies have been a key factor in most east and southeast asian successful growth strategies there is also today an important empirical literature that relates overvaluations to low per capita growth rates while the econometric literature on this issue is relatively rich theoretical analysis of channels through which real exchange rate levels could affect economic development are very scarce this paper intends to contribute to the debate by bringing more theoretical elements and providing new econometric evidence to the connections between real exchange rate levels and development

the nafta preference and us mexico trade aggregate level analysis this paper focuses on the us tariff preference afforded to mexico relative to non nafta trading partners and evaluates the trade effects of nafta in a manner consistent with the idea behind a preferential trading agreement the estimation technique exploits the time varying dimension of the tariff preference over 1989 to 2001 this is important because the tariff preference for mexico into the united states market existed prior to nafta further the nafta preference was phased in over time we find that a higher us tariff preference for mexico corresponds to increased us import demand for mexican goods and that a higher mexican tariff preference for the united states corresponds to increased mexican demand for us exports interestingly import demand was more responsive to changes in the tariff preference once nafta was in place than it was on average

preferences intentions and expectation violations a large scale experiment with a representative subject pool we specify and estimate an econometric model which separately identifies the effects of distributional preferences and penalizing unfair proposer behavior perceived intentions on responder decisions in the ultimatum game we allow the effects of perceived intentions to depend among other things on the subjective probabilities responders attach to the possible offers the latter allows expectation violations to be a driving force for responder behavior we estimate the model on a large representative sample from the dutch population we find that the relative importance of distributional preferences and perceived intentions depends significantly on the socio economic characteristics of responders strong inequity aversion to the other player s disadvantage is found for lower educated and older respondents responders tend to punish more unequal offers made by proposers if they expect that unequal proposals are made less often

double for nothing experimental evidence on an unconditional teacher salary increase in indonesia how does a large unconditional increase in salary affect the performance of incumbent employees in the public sector this paper presents experimental evidence on this question in the context of a policy change in indonesia that led to a permanent doubling of teachers base salaries the analysis uses a large scale randomized experiment across a representative sample of indonesian schools that accelerated this pay increase for teachers in treated schools the findings show that the large pay increase significantly improved teachers satisfaction with their income reduced the incidence of teachers holding outside jobs and reduced self reported financial stress nevertheless after two and three years the increase in pay led to no improvement in student learning outcomes the effects are precisely estimated making it possible to rule out even modest positive impacts on test scores the results suggest that unconditional pay increases are unlikely to be an effective policy option for improving the effort and productivity of incumbent employees in public sector settings

gift exchange in the workplace addressing the conflicting evidence with a careful test tests of gift exchange wherein agents receive excess wages which are noncontingent on performance in one shot settings have yielded contradictory evidence they sometimes find effort boosts consistent with gift exchange whereas they sometimes find no effort increases consistent with a standard model we identify eight confounds that could have led to the mixed evidence agent disutility from being viewed as selfish small samples insufficient wage raises an effort ceiling fatigue selection of abler workers reemployment concerns and peer effects and run a comprehensive test addressing them our test consisted of a field experiment hiring workers for a data entry job followed by laboratory games assessing their prosocial behavior after addressing these confounds we find that behavior during the field test was consistent with a standard model workers did not repay fixed wage raises with an effort boost but they did raise effort in response to a piece rate the piece rate scheme was also more e

a structural economic dynamics approach to balance of payments constrained growth this paper derives a balance of payments equilibrium growth rate analogous to thirlwall s law from a pasinettian multi sector macrodynamic framework the resulting formula which we call the multi sectoral thirlwall s law asserts that a country s growth rate of per capita income is directly proportional to the growth rate of its exports with such a proportionality being inversely directly related to sectoral income elasticities of demand for imports exports these income elasticities are weighted by coefficients that measure the share of each sector in total imports and exports respectively it is shown that several theoretical empirical and policy implications can be drawn from such a structural economic dynamics approach to balance of payments constrained growth

do monetary incentives undermine performance on intrinsically enjoyable tasks a field test economists have long been intrigued by an influential literature in psychology positing that monetary pay lowers performance on enjoyable tasks by crowding out agents intrinsic interest in them b

spite and development in a wide variety of settings spiteful preferences would constitute an obstacle to cooperation trade and thus economic development this paper shows that spiteful preferences the desire to reduce another s material payoff for the mere purpose of increasing one s relative payoff are surprisingly widespread in experiments conducted in one of the least developed regions in india uttar pradesh in a one shot trust game the authors find that a large majority of subjects punish cooperative behavior although such punishment clearly increases inequality and decreases the payoffs of both subjects in experiments to study coordination and to measure social preferences the findings reveal empirical patterns suggesting that the willingness to reduce another s material payoff either for the sake of achieving more equality or for the sake of being ahead is stronger among individuals belonging to high castes than among those belonging to low castes because extreme social hierarchies are typically accompanied by a culture that stresses status seeking it is plausible that the observed social preference patterns are at least partly shaped by this culture thus an exciting question for future research is the extent to which different institutions and cultures produce preferences that are conducive or detrimental to economic development

altruism spillovers are behaviors in context free experiments predictive of altruism toward a naturally occurring public good abstract this paper addresses the external validity of experiments investigating the characteristics of altruism in the voluntary provision of public goods we conduct two related experiments that allow us to examine whether individuals who act more altruistically in the context free environment are also more likely to act altruistically toward a naturally occurring public good we find that laboratory behavior can be predictive of contributions toward naturally occurring goods but not in a uniform way in fact parametric measures of altruism do a poor job of predicting which subjects are most likely to contribute to a naturally occurring public good

corruption and culture an experimental analysis article i nfo article history why do some people choose corruption over honesty and others not do the social norms and values prevailing in the societies in which they grew up affect their decisions in 2005 we conducted a bribery experiment and found that among undergraduates we could predict who would act corruptly with reference to the level of corruption in their home country among graduate students we could not in 2007 we replicated our result and also found that time spent in the uk was associated with a decline in the propensity to bribe although this does not explain our inability to predict graduate behaviour we conclude that while corruption may in part be a cultural phenomenon individuals should not be prejudged with reference to their country of origin

reciprocity under brief and long time delays we report the results from three experiments embedded in the same overarching design which extends the gift exchange paradigm for the study of worker employer relationships we focus on the effect of the length of the delay between the time at which workers learn their wage and when they choose an effort level on the relationship between wage and effort we compare effort choices made within a few hours with those made several weeks afterward we find that the strength of the wage effort relationship decreases over time and this change appears to be driven by workers who receive low wages jel c91 j33 m52

the timing of discretionary bonuses effort signals and reciprocity abstract in a real effort experiment we investigate the relationship between reciprocity and the timing of discretionary bonuses in a two period principal agent manager worker setting we vary the timing of the manager s bonus decision in order to examine two main channels reward and trust through which discretionary bonuses may operate average worker performance improves when bonus decisions are made between the two periods since both channels are simultaneously active first period output significantly increases as workers attempt to signal their trustworthiness to managers when the bonus decision is made upfront or at the end average output is no different than in a baseline setting without the bonus mechanism furthermore output after a bonus is not paid decreases substantially consistent with negative reciprocity our main findings are reinforced by using time spent on the available real leisure activity as an alternative measure of subjects effort

implicit contracts incentive compatibility and involuntary unemployment this paper considers the enforceability of employment contracts when employees performance cannot be verified in court so that piece rate contracts are not legally enforceable part i shows that there exists a variety of self enforcing implicit contracts modelled as perfect equilibria in a repeated game and characterizes all the wage and performance outcomes that can be implemented implementation requires a strictly positive surplus from employment the form of the contract depending on how this surplus is divided between firm and employee piece rate contracts and contracts with an informally agreed bonus can be made self enforcing but the use of severance pay and bonding does not extend the set of implementable allocations the resulting contracts resemble actual labor contracts more than do the contracts in standard principal agent models part ii analyses market equilibrium with these contracts also modelled as perfect equilibria in a repeated game and shows that many such equilibria exist unfilled vacancies and unemployed workers can co exist despite the existence of contracts that are potentially mutually beneficial for those jobs that are filled any division of the potential surplus is possible so that the market can have at the same time involuntary unemployment and vacancies that are unfilled despite filled jobs earning positive profits as a criterion for selecting equilibria a notion of renegotiation proofness is applied then either all workers are employed or all jobs filled but any division of the potential surplus is still possible the paper explores what further restrictions on beliefs give rise to a walrasian outcome in which all the potential surplus goes to the short side of the market and to an efficiency wage type outcome in which the potential surplus goes to the long side

what limits escalation varying threat power in an ultimatum experiment abstract threat power is the ability to impose a great loss on someone else at relatively low own cost and can be measured by the ratio of other s and own loss it can be varied by assuming that rejecting an ultimatum reduces the payoff of the proposer to its share and that of the responder to its 1 share where 0 1 results demonstrate that proposers become more greedy when is high whereas responders adjust to threat power but punish greed to a high extent irrespective of own rejection cost

preference shifts between consumption goods and sectoral changes abstract this paper analyzes under which conditions a shift in the relative preferences between consumption goods may induce a change in the equilibrium values of the sectoral variables in the same direction compared with the previous static equilibrium

timing of kindness evidence from a field experiment abstract we conduct a field experiment in a naturally occurring labor environment and track whether the performance of workers responds to unexpected wage increases specifically we investigate how the timing of wage increases affects efforts we find that workers performance is substantially higher for the same total wage when their wage is increased in two steps as opposed to a single increase at the outset moreover workers are more honest and are more willing to do voluntary extra work after surprising wage increases compared to a baseline condition without increases

do wage cuts damage work morale evidence from a natural field experiment employment contracts are often incomplete leaving many responsibilities subject to workers discretion high work morale is therefore essential for sustaining voluntary cooperation and high productivity in firms we conducted a field experiment to test whether workers reciprocate wage cuts and raises with low or high work productivity wage cuts had a detrimental and persistent impact on productivity reducing average output by more than 20 percent an equivalent wage increase however did not result in any productivity gains the results from an additional control experiment with high monetary performance incentives demonstrate that workers could still produce substantially more output leaving enough room for positive reactions altogether these results provide evidence consistent with a model of reciprocity as opposed to inequality aversion

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment