|Scabs: The Social Suppression of Labor Supply|
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Social norms have the potential to alter the functioning of economic markets. We test whether norms shape the aggregate labor supply curve by leading decentralized individuals to maintain wage floors in their local labor markets. We partner with existing employers who create new jobs for workers in informal spot labor markets. Unemployed workers would like to find work, and prefer to do so even at wages below the prevailing wage rather than remain unemployed. However, they rarely do so when this choice is observable to other workers. In contrast, social observability does not affect labor supply at the prevailing wage. Consistent with the idea that norms could have aggregate implications, measures of social cohesion correlate with downward wage rigidity and business cycle volatility across...
|The Morale Effects of Pay Inequality|
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The idea that worker utility is affected by co-worker wages has potentially broad labor market implications. In a month-long experiment with Indian manufacturing workers, we randomize whether co-workers within production units receive the same flat daily wage or different wages (according to baseline productivity rank). For a given absolute wage, pay inequality reduces output and attendance by 0.24 standard deviations and 12%, respectively. These effects strengthen in later weeks. Pay disparity also lowers co-workers’ ability to cooperate in their self-interest. However, when workers can clearly observe productivity differences, pay inequality has no discernible effect on output, attendance, or group cohesion.
Published: Emily Breza & Supreet Kaur & Yogita Shamdasani, 2018. "The Morale Effects of Pay Inequality*," The Quarterly Journal of Economics, vol 133(2), pages 611-663. citation courtesy of
|Nominal Wage Rigidity in Village Labor Markets|
This paper tests for downward nominal wage rigidity by examining transitory shifts in labor demand, generated by rainfall shocks, in 600 Indian districts from 1956-2009. Nominal wages rise in response to positive shocks but do not fall during droughts. In addition, transitory positive shocks generate ratcheting: after they have dissipated, nominal wages do not adjust back down. This ratcheting effect generates a 9% reduction in employment levels. Inflation enables downward real wage adjustments both during droughts and after positive shocks. Survey evidence suggests that workers and employers believe that nominal wage cuts are unfair and lead to effort reductions.
Published: Supreet Kaur, 2019. "Nominal Wage Rigidity in Village Labor Markets," American Economic Review, vol 109(9), pages 3585-3616.