Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2019
  • Working Paper
  • HBS Working Paper Series

How Much Does Your Boss Make? The Effects of Salary Comparisons

By: Zoë B. Cullen and Ricardo Perez-Truglia
  • Format:Print
  • | Language:English
  • | Pages:122
ShareBar

Abstract

The vast majority of the pay inequality in an organization comes from differences in pay between employees and their bosses. But are employees aware of these pay disparities? Are employees demotivated by this inequality? To address these questions, we conducted a field experiment with a sample of 2,060 employees from a multibillion-dollar corporation. We make use of the firm’s administrative records alongside survey data and information-provision experiments. First, we document large misperceptions among the employees about the salaries of their managers and smaller but still significant misperceptions of the salaries of their peers. Second, we show that these perceptions have a significant causal effect on the employees’ own behavior. When they find out that their managers earn more than they thought, employees work harder on average. We provide evidence that these effects are consistent with career-concerns models. In contrast, employees work less hard when they find out that their peers earn more. We conclude by discussing implications for pay inequality and pay transparency.

Keywords

Salary; Pay Transparency; Negotiation; Compensation; Inequality; Gender Inequality; Wages; Equality And Inequality; Perception; Behavior

Citation

Cullen, Zoë B., and Ricardo Perez-Truglia. "How Much Does Your Boss Make? The Effects of Salary Comparisons." Harvard Business School Working Paper, No. 19-013, August 2018. (Revise and Resubmit at Journal of Political Economy. NBER Working Paper Series, No. 24841, August 2018)
  • SSRN
  • Read Now

About The Author

Zoe B. Cullen

Entrepreneurial Management
→More Publications

More from the Authors

    • 2020
    • Faculty Research

    The Targeting and Impact of Paycheck Protection Program Loans to Small Businesses

    By: Alexander Bartik, Zoë B. Cullen, Edward L. Glaeser, Michael Luca, Christopher Stanton and Adi Sunderam
    • Proceedings of the National Academy of Sciences

    The Impact of COVID-19 on Small Business Outcomes and Expectations

    By: Alexander Bartik, Marianne Bertrand, Zoë B. Cullen, Edward L. Glaeser, Michael Luca and Christopher Stanton
    • 2020
    • Faculty Research

    What Jobs Are Being Done at Home During the COVID-19 Crisis? Evidence from Firm-Level Surveys

    By: Alexander Bartik, Zoë Cullen, Edward L. Glaeser, Michael Luca and Christopher Stanton
More from the Authors
  • The Targeting and Impact of Paycheck Protection Program Loans to Small Businesses By: Alexander Bartik, Zoë B. Cullen, Edward L. Glaeser, Michael Luca, Christopher Stanton and Adi Sunderam
  • The Impact of COVID-19 on Small Business Outcomes and Expectations By: Alexander Bartik, Marianne Bertrand, Zoë B. Cullen, Edward L. Glaeser, Michael Luca and Christopher Stanton
  • What Jobs Are Being Done at Home During the COVID-19 Crisis? Evidence from Firm-Level Surveys By: Alexander Bartik, Zoë Cullen, Edward L. Glaeser, Michael Luca and Christopher Stanton
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College