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Reciprocity in the labour market: experimental evidence

Author

Listed:
  • Annarita COLASANTE

    (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

  • Alberto RUSSO

    (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

Abstract
In this paper we focus on the impact of involuntary unemployment on wage formation using experimental evidence. We use the well-known Gift Exchange Game to analyze players' interaction in a simplified job market. The aim of this paper is twofold: on the one hand, we are interested in analyzing the relation between involuntary unemployment and wages; on the other hand, we aim at understanding whether the interaction between employers and employees could be affected by reciprocity. Our results show that unemployment has a negative impact on wages. Moreover, there is a positive correlation between wage and effort.

Suggested Citation

  • Annarita COLASANTE & Alberto RUSSO, 2014. "Reciprocity in the labour market: experimental evidence," Working Papers 404, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    • Handle: RePEc:anc:wpaper:404
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    References listed on IDEAS

    as
    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Gary Charness, 2004. "Attribution and Reciprocity in an Experimental Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 665-688, July.
    3. Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 437-459.
    4. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
    5. Ernst Fehr & Armin Falk, 1999. "Wage Rigidity in a Competitive Incomplete Contract Market," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 106-134, February.
    6. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    7. Pereira, Paulo T. & Silva, Nuno & Silva, Joao Andrade e, 2006. "Positive and negative reciprocity in the labor market," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 406-422, March.
    8. Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, vol. 72(3), pages 747-780, May.
    9. Fehr, Ernst & Kirchler, Erich & Weichbold, Andreas & Gächter, Simon, 1998. "When Social Norms Overpower Competition: Gift Exchange in Experimental Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 324-351, April.
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    13. Fehr, Ernst & Kirchsteiger, Georg & Riedl, Arno, 1996. "Involuntary Unemployment and Non-compensating Wage Differentials in an Experimental Labour Market," Economic Journal, Royal Economic Society, vol. 106(434), pages 106-121, January.
    14. Fortuna Casoria & Arno Riedl, 2013. "Experimental Labor Markets And Policy Considerations: Incomplete Contracts And Macroeconomic Aspects," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 398-420, July.
    15. Armin Falk, 2007. "Gift Exchange in the Field," Econometrica, Econometric Society, vol. 75(5), pages 1501-1511, September.
    16. Carl M. Campbell III & Kunal S. Kamlani, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 759-789.
    17. Fehr, Ernst & Falk, Armin, 2008. "Reciprocity in Experimental Markets," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 38, pages 325-334, Elsevier.
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    More about this item

    Keywords

    Gift Exchange; Reciprocity; Unemployment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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