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Research Seminar

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

Abstract

We study how employees learn about the salaries of their peers and managers, and how those beliefs affect their own behavior. We conducted a field experiment with a sample of 2,000 employees from a multi-billion-dollar corporation. We combine rich data from surveys and administrative records with an experiment that provided some employees with accurate information about the salaries of others. First, we document large misperceptions about salaries and identify some of the sources of these misperceptions. Second, we find significant behavioral elasticities with respect to the perceived salaries of other employees. These effects are different for horizontal and vertical comparisons: while higher perceived peer salary decreases effort, output and retention, higher perceived manager salary has a positive effect on those same outcomes. We discuss evidence on the underlying mechanisms, and implications for pay inequality and pay transparency.

Presented by

Ricardo Perez-Truglia (University of California, Los Angeles)

Date & time

Mar 30, 2018 2:00 pm - 3:30 pm

Organised by the Guest Researchers and Seminars Programme (GRaSP)

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