Department of Economics
University of California, Berkeley
Berkeley, CA 94720
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
NBER Working Papers and Publications
|August 2016||The 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 2014||Nominal Wage Rigidity in Village Labor Markets|
This paper tests for downward nominal wage rigidity in markets for casual daily agricultural labor in a developing country context. I examine transitory shifts in labor demand, generated by rainfall shocks, in 600 Indian districts from 1956-2009. First, there is asymmetric adjustment: nominal wages rise in response to positive shocks but do not fall during droughts. Second, transitory positive shocks generate ratcheting: after they have dissipated, nominal wages do not adjust back down. Third, inflation moderates these effects, enabling downward real wage adjustments both during droughts and after positive shocks. Fourth, wage distortions generate employment distortions, creating boom and bust cycles: employment is 9% lower in the year after a transitory positive shock than if the positi...