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 lead to increased productivity? In a field experiment with 266 employees, we find that paying above-market wages, per se, does not have an effect on productivity relative to paying market wages (in a context with no future employment opportunities). However, structuring a portion of the wage as a clear and unexpected gift—by offering a raise (with no additional conditions) after the employee has accepted the contract―does lead to higher productivity for the duration of the job. Targeted gifts are more efficient than hiring more workers. However, the mechanism underlying our effect 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." Working Paper. (November 2014. Revised and resubmitted, Management Science.)