The effects of pay inequality
The idea that worker utility is affected by co-worker wages has potentially broad labour market implications. In a month-long experiment with Indian manufacturing workers, Emily Breza, Supreet Kaur and Yogita Shamdasani (Breza et al. 2017) establish the effects of pay inequality on co-workers within production units. She finds that pay inequality reduces output, as well as attendance by 10%. Pay disparity also lowers co-workers' ability to cooperate. However, when workers can clearly observe productivity differences, pay inequality has no discernible effect on output, attendance, or group cohesion.
Editors' note: This video is based on this PEDL project.
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Date Published
Thursday, February 8, 2018
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