Working Paper | HBS Working Paper Series | 2014

When 3+1>4: Gift Structure and Reciprocity in the Field

by Duncan Gilchrist, Michael Luca and Deepak Malhotra

Abstract

Do higher wages elicit reciprocity and hence higher effort? In a field experiment with 266 employees, we find that paying above-market wages, per se, does not have an effect on effort relative to paying market wages. However, structuring a portion of the wage as a clear and unexpected gift (by offering a raise with no further conditions after the employee has accepted the contract—with no future employment) does lead to higher effort for the duration of the job. Targeted gifts are more efficient than hiring more workers. However, the mechanism makes this unlikely to explain persistent above-market wages.

Keywords: Wages; Employees;

Citation:

Gilchrist, Duncan, Michael Luca, and Deepak Malhotra. "When 3+1>4: Gift Structure and Reciprocity in the Field." Harvard Business School Working Paper, No. 14-030, September 2013. (Revise and resubmit, Management Science.)