Gift Exchange in the Workplace: Addressing the Conflicting Evidence with a Careful Test

Tests of gift exchange, wherein agents receive excess wages which are noncontingent on performance in one-shot settings, have yielded contradictory evidence: they sometimes find effort boosts, consistent with gift exchange, whereas they sometimes find no effort increases, consistent with a standard model. We identify eight confounds that could have led to the mixed evidence-agent disutility from being viewed as selfish, small samples, insufficient wage raises, an effort ceiling, fatigue, selection of abler workers, reemployment concerns, and peer effects-and run a comprehensive test addressing them. Our test consisted of a field experiment hiring workers for a data entry job, followed by laboratory games assessing their prosocial behavior. After addressing these confounds, we find that behavior during the field test was consistent with a standard model: workers did not repay fixed wage raises with an effort boost, but they did raise effort in response to a piece rate. The piece-rate scheme was also more efficient: the effort boost came at lower expense than paying fixed wage raises. Further, workers who behaved prosocially in laboratory games did not behave prosocially in the field.