Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior
NBER Working Paper No. 24906
We analyze how separations responded to arbitrary differences in own and peer wages at a large U.S. retailer. Regression-discontinuity estimates imply large causal effects of own wages on separations, and on quits in particular. However, this own-wage response could reflect comparisons either to market wages or to peer wages. Estimates using peer-wage discontinuities show large peer-wage effects and imply the own-wage separation response mostly reflects peer comparisons. The peer effect is driven by comparisons with higher-paid peers—suggesting concerns about fairness. Separations appear fairly insensitive when raises are similar across peers—suggesting search frictions and monopsony are relevant in this low-wage sector.
Document Object Identifier (DOI): 10.3386/w24906
Published: Arindrajit Dube & Laura Giuliano & Jonathan Leonard, 2019. "Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior," American Economic Review, vol 109(2), pages 620-663. citation courtesy of