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Title: On the Relevance and Composition of Gifts within the Firm: Evidence from Field Experiments
Authors: Bellemare, Charles
Shearer, Bruce
Keywords: Gift giving
structural models
field experiments
Issue Date: 2009-08
Series/Report no.: Cahiers du CIRPÉE;09-32
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.
URI: https://depot.erudit.org/id/003096dd
Appears in Collections:Cahiers de recherche du CIRPÉE

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