Journal
JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION
Volume 163, Issue -, Pages 409-429Publisher
ELSEVIER
DOI: 10.1016/j.jebo.2019.05.006
Keywords
Reference dependence; Loss aversion; Asymmetric reciprocity; Downward wage rigidity
Categories
Ask authors/readers for more resources
We develop a model of asymmetric reciprocity and optimal wage setting based on contractual incompleteness, fairness, and reference dependence and loss aversion in the evaluation of wages by workers. The model establishes a positive wage-effort relationship capturing a worker's 'asymmetric reference-dependent reciprocity', in which loss aversion implies negative reciprocity is stronger than positive reciprocity. Our theory provides an explanation for the observed asymmetry and dynamics of workers' reciprocity and establishes a micro-foundation for downward wage rigidity, the implications of which shed new light on a forward-looking firm's optimal wage setting and hiring decisions. (C) 2019 Elsevier B.V. All rights reserved.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available