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|Title:||On the relevance and composition of gifts within the firm: evidence from field experiments |
Shearer, Bruce S.
|Issue Date:||2009 |
|Series/Report no.:||IZA Discussion Papers 4339|
|Abstract:||We investigate the economic relevance and the composition of gifts within a firm where output is contractible. We develop a structural econometric model that identifies workers' optimal reaction to monetary gifts received from their employer. We estimate the model using data from two separate field experiments, both conducted within a tree-planting firm. We use the estimated structural parameters to generalize beyond the experiment, simulating how workers would react to different gifts on the part of the firm, within different labour-market settings. We find that gifts have a role to play within this firm, increasing in importance when the workers' outside alternatives deteriorate. Profit-maximizing gifts would increase profits within slack labour markets by up to 10% on average and by up to 17% for certain types of workers. These gifts represent significant increases in worker earnings; the average gift paid to workers attains 22% of average expected earnings in the absence of gifts. We find that gifts should be given by setting piece-rates above the market-clearing level rather than through fixed wages.|
|Persistent Identifier of the first edition:||urn:nbn:de:101:1-20090909394|
|Document Type:||Working Paper|
|Appears in Collections:||IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)|
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