How Much Does Your Boss Make? The Effects of Salary Comparisons

Cullen, Zoë; Pérez-Truglia, Ricardo

doi:10.2139/ssrn.3200136

Cited by 9 publications

(11 citation statements)

References 63 publications

(106 reference statements)

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“…The slope of this linear relationship (the gray line) corresponds to the coefficient β in the learning equation (3), which measures "spurious" learning. We find significant spurious learning, which is consistent with findings from related studies (see, for example, Fuster et al, 2020;Cullen and Perez-Truglia, 2018). 15 In turn, the red squares correspond to the treatment group (i.e., individuals who receive the inflation feedback).…”

Section: Effect Of Information On Posterior Beliefssupporting

confidence: 89%

“…For instance, the effects of information shocks on inflation expectations last for at least a few months (Cavallo, Cruces, and Perez-Truglia, 2017). 3 Fourth, information experiments similar to the one in this study have been shown to affect high-stakes decisions measured in administrative data: e.g., employees work harder after increasing their expectations of future salary increases (Cullen and Perez-Truglia, 2018), home sellers are less likely to sell their homes when their home price expectations increase (Bottan and Perez-Truglia, 2020b), and employees revise savings decisions in response to feedback about the choices of their peers (Beshears et al, 2015).…”

Section: Introductionmentioning

confidence: 79%

“…Lastly, providing information with similar methods has been shown to affect behavior significantly in other contexts. For instance, individuals change their effort after updating beliefs about their future earnings potential (Cullen and Perez-Truglia, 2018) and delay home sales when updating beliefs about future home prices in the area (Bottan and Perez-Truglia, 2020b).…”

Section: Discussionmentioning

confidence: 99%

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Macroeconomic Expectations and Credit Card Spending

Galashin

Kanz

Pérez-Truglia

2021

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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Section: Effect Of Information On Posterior Beliefssupporting

confidence: 89%

Section: Introductionmentioning

confidence: 79%

Section: Discussionmentioning

confidence: 99%

See 1 more Smart Citation

Macroeconomic Expectations and Credit Card Spending

Galashin

Kanz

Pérez-Truglia

2021

Policy Research Working Papers

Self Cite

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“…is the wage offer distribution, δ is the exogenous separation rate, and λ is the offer arrival rate; search frictions are captured by lower values of λ . 7 A key assumption of this model is that wages vary across firms but not within firms. The separations (or quits) response to a wage increase, therefore, depends only on market comparisons and is given by dS/dw = −λf (w).…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior

Dubé¹,

Giuliano²,

Leonard

2019

American Economic Review

123

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We 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. (JEL D63, J31, J42, J62, L81)When making decisions about job mobility, do workers mainly compare their pay with the outside market? Or do they also make comparisons with the pay of coworkers in their own firm? If workers are very sensitive to wage differences across firms as in the standard competitive labor-market model, then employers have little scope to set wages. But even if a firm's wage-setting is not fully constrained by market competition, employers could still be constrained by employee concerns about relative pay within the firm. Such internal constraints could lead to wage compression or to measures that inhibit comparisons across coworkers-such as pay secrecy and outsourcing of jobs. Estimates of how employee turnover responds to external and internal wage comparisons are therefore central to understanding the wage-setting behavior and other employment practices of firms. Yet the endogeneity of wages in natural employment settings has made causal evidence hard to establish.In this paper, we analyze how job separations responded to arbitrary wage differences among sales employees at a large US retailer with hundreds of stores nationwide (henceforth "the firm"). Using quasi-experimental variation that resulted from a

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“…This research explores the non-price interdependencies that intertwine coworkers' fates and finds that typically interdependence limits, rather than heightens, local pay differences. Fairness concerns and workgroup solidarity tend to compress pay inequality (Wilmers, 2019), particularly for horizontal comparisons among peers (Cullen and Perez-Truglia, 2018;Dube, Giuliano, and Leonard, 2018). Similarly, research on team collaboration and peer effects has found that proximity to high-ability peers pulls up workers' productivity, further muting pay differences between coworkers (Mas and Moretti, 2009;Cornelissen, Dustmann, and Schö nberg, 2017).…”

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confidence: 99%

Job Turf or Variety: Task Structure as a Source of Organizational Inequality

Wilmers

2020

Administrative Science Quarterly

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What explains pay inequality among coworkers? Theories of organizational influence on inequality emphasize the effects of formal hierarchy. But restructuring, firm flattening, and individualized pay setting have challenged the relevance of these structuralist theories. I propose a new organizational theory of differences in pay, focused on task structure and the horizontal division of labor across jobs. When organizations specialize jobs, they reduce the variety of tasks performed by some workers. In doing so they leave exclusive job turf to other coworkers, who capture the learning and discretion associated with performing a distinct task. The division of labor thus erodes pay premiums for some workers while advantaging others through job turf. I test this theory with linked employer–employee panel data from U.S. labor unions, which include a type of data that is rarely collected: annual reporting on work tasks. Results show that reducing task variety lowers workers’ earnings, while increasing job turf raises earnings. When organizations reduce task variety for some workers, they increase job turf for others. Without assuming fixed job hierarchies and pay rates, interdependencies in organizational task allocation yield unequal pay premiums among coworkers.

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How Much Does Your Boss Make? The Effects of Salary Comparisons

Cited by 9 publications

References 63 publications

Macroeconomic Expectations and Credit Card Spending

Macroeconomic Expectations and Credit Card Spending

Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior

Job Turf or Variety: Task Structure as a Source of Organizational Inequality

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