Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments

Authors

  • Uri Gneezy,

    1. The Rady School of Management, University of California–San Diego, 9500 Gilman Dr., La Jolla, CA 92093, U.S.A.; ugneezy@gsb.uchicago.edu
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  • John A List

    1. Dept. of Economics at Chicago, University of Chicago, 5807 South Woodlawn Ave., Chicago, IL 60637, U.S.A.; NBER, and RFF; jlist@uchicago.edu.
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    • 1

      A co-editor and four anonymous reviewers provided comments that significantly improved the study. Ernst Fehr and Glenn Harrison also provided remarks that improved the manuscript. Stefan Andersen provided fine research assistance. Craig Landry, Andreas Lange, Michael Price and Nicholas Rupp also helped with gathering the data. Jamie Brown-Kruse worked with us in her capacity as the Director of the Hazards Center.


Abstract

Recent discoveries in behavioral economics have led scholars to question the underpinnings of neoclassical economics. We use insights gained from one of the most influential lines of behavioral research—gift exchange—in an attempt to maximize worker effort in two quite distinct tasks: data entry for a university library and door-to-door fundraising for a research center. In support of the received literature, our field evidence suggests that worker effort in the first few hours on the job is considerably higher in the “gift” treatment than in the “nongift” treatment. After the initial few hours, however, no difference in outcomes is observed, and overall the gift treatment yielded inferior aggregate outcomes for the employer: with the same budget we would have logged more data for our library and raised more money for our research center by using the market-clearing wage rather than by trying to induce greater effort with a gift of higher wages.

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