NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Supreet Kaur

Department of Economics
University of California, Berkeley
Evans Hall
Berkeley, CA 94720

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NBER Program Affiliations: DEV
NBER Affiliation: Faculty Research Fellow

NBER Working Papers and Publications

August 2016The Morale Effects of Pay Inequality
with Emily Breza, Yogita Shamdasani: w22491
The idea that worker utility is affected by co-worker wages has potentially broad labor market implications. In a month-long experiment with Indian manufacturing workers, we randomize whether co-workers within production units receive the same flat daily wage or different wages (according to baseline productivity rank). For a given absolute wage, pay inequality reduces output and attendance by 0.24 standard deviations and 12%, respectively. These effects strengthen in later weeks. Pay disparity also lowers co-workers’ ability to cooperate in their self-interest. However, when workers can clearly observe productivity differences, pay inequality has no discernible effect on output, attendance, or group cohesion.
December 2014Nominal Wage Rigidity in Village Labor Markets
w20770
This paper tests for downward nominal wage rigidity by examining transitory shifts in labor demand, generated by rainfall shocks, in 600 Indian districts from 1956-2009. Nominal wages rise in response to positive shocks but do not fall during droughts. In addition, transitory positive shocks generate ratcheting: after they have dissipated, nominal wages do not adjust back down. This ratcheting effect generates a 9% reduction in employment levels. Inflation enables downward real wage adjustments both during droughts and after positive shocks. Survey evidence suggests that workers and employers believe that nominal wage cuts are unfair and lead to effort reductions.
 
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