NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Yogita Shamdasani

Department of Economics
University of Pittsburgh
4901 Wesley W. Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260

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NBER Working Papers and Publications

August 2016The Morale Effects of Pay Inequality
with Emily Breza, Supreet Kaur: 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.

Published: Emily Breza & Supreet Kaur & Yogita Shamdasani, 2018. "The Morale Effects of Pay Inequality*," The Quarterly Journal of Economics, vol 133(2), pages 611-663.

 
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