Publications
Publications
- 2019
Equilibrium Effects of Pay Transparency in a Simple Labor Market
By: Zoë B. Cullen and Bobak Pakzad-Hurson
Abstract
The public discourse around pay transparency has focused on the direct effect: how workers seek
to rectify newly disclosed pay inequities through renegotiations. The question of how wage-setting,
bargaining, and hiring practices change with higher transparency has received less attention. To
study these outcomes, we combine a dynamic wage-bargaining model with data from online labor
markets for low-skill, temporary jobs. We exploit naturally occurring variation in pay transparency
as well as experimentally-induced variation. Wages are more equal, but lower under transparency.
An increase in transparency raises the hiring rate when workers have sufficient bargaining power.
Employer profits rise with transparency, increasing 27% in a field experiment. A key insight is
that increasing transparency decreases the bargaining power of workers, as employers credibly
refuse to pay high wages to any one worker to avoid costly renegotiations with others. We discuss
implications for the gender wage gap and employers' endogenous transparency choices.
Keywords
Pay Transparency; Online Labor Market; Privacy; Wage Gap; Negotiation; Corporate Disclosure; Compensation And Benefits; Gender
Citation
Cullen, Zoë B., and Bobak Pakzad-Hurson. "Equilibrium Effects of Pay Transparency in a Simple Labor Market." Working Paper, April 2019. (Formerly two papers, "Equal Work for Unequal Pay" and "Is Pay Transparency Good?" Selected as Exemplary Applied Modeling Paper at EC '19.)