When 3 + 1 > 4: Gift Structure and Reciprocity in the Field

Do higher wages elicit reciprocity and hence higher productivity? In a field experiment with 266 employees, we find that paying above-market wages, per se, does not have an effect on productivity relative to paying market wages. However, structuring a portion of the wage as a clear and unexpected gift (by offering a raise with no further conditions after the employee has accepted the contract – with no future employment) does lead to higher productivity for the duration of the job. Targeted gifts are more efficient than hiring more workers. However, the mechanism makes this unlikely to explain persistent above-market wages. 1 [email protected], Harvard University 2 [email protected], Harvard Business School 3 [email protected], Harvard Business School We thank Kristiana Laugen for exceptional research assistance.