Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior
AbstractWe analyze how separations responded to arbitrary differences in own and peer wages at a large US retailer. Regression-discontinuity estimates imply large causal effects of own-wages on separations, and on quits in particular. However, this own-wage response could reflect comparisons either to market wages or to peer wages. Estimates using peer-wage discontinuities show large peer-wage effects and imply the own-wage separation response mostly reflects peer comparisons. The peer effect is driven by comparisons with higher-paid peers—suggesting concerns about fairness. Separations appear fairly insensitive when raises are similar across peers—suggesting search frictions and monopsony are relevant in this low-wage sector.
CitationDube, Arindrajit, Laura Giuliano, and Jonathan Leonard. 2019. "Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior." American Economic Review, 109 (2): 620-63. DOI: 10.1257/aer.20160232
- D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- J31 Wage Level and Structure; Wage Differentials
- J42 Monopsony; Segmented Labor Markets
- J62 Job, Occupational, and Intergenerational Mobility; Promotion
- L81 Retail and Wholesale Trade; e-Commerce