The Salary Taboo: Privacy Norms and the Diffusion of Information

Zoë B. Cullen, Ricardo Perez-Truglia

NBER Working Paper No. 25145
Issued in October 2018, Revised in November 2019
NBER Program(s):Law and Economics Program, Labor Studies Program, Public Economics Program, Political Economy Program

The diffusion of salary information has important implications for labor markets, such as wage discrimination policies and collective bargaining. Despite the widespread view that transmission of salary information is imperfect and unequal, there is little direct evidence on the magnitude and sources of these frictions. We conduct a field experiment with 755 employees at a multibillion-dollar corporation to study how people search for and share salary information. We show that most employees have inaccurate beliefs about the average salary of their peers. We provide evidence that such misperceptions arise, in part, due to search costs, and we provide suggestive evidence that these costs are associated with privacy norms. Last, we show that, contrary to widespread belief, there are no significant gender differences in misperceptions, search costs, and privacy norms.

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Document Object Identifier (DOI): 10.3386/w25145