Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine!

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October 2019
Paper author(s): 
Hernán Bejerano
Brice Corgnet
Joaquín Gómez-Miñambres

We extend Akerlof’s (1982) gift-exchange model to the case in which reference wages respond to changes in the work environment such as those related to unemployment benefits or workers’ productivity levels. Our model shows that these changes spur disagreements between workers and employers regarding the value of the reference wage. These disagreements tend to weaken the gift-exchange relationship thus reducing production levels and wages. We find support for these predictions in a controlled, yet realistic, workplace environment. Our work also sheds light on several stylized facts regarding employment relationships such as the increased intensity of labor conflicts when economic conditions are unstable.


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