We develop and analyze a structural model of efficiency wages founded on reciprocity. Workers are assumed to face an explicit trade-off between the disutility of providing effort and the psychological benefit of reciprocating the gift of a wage offer above some reference level. The model provides a rationale for rent sharing—a feature that is very much present in the data but absent from previo...

One of the most provocative findings in experimental economics is that many individuals seem to be willing to spend considerable resources to reward (punish) fair (unfair) behavior by others even though no direct material gain derives from such action. In Fehr and Falk (1999), individuals are either assigned the role of a worker or a firm manager.1 Even though competitive bidding should push th...

This article outlines possible uses of information technology, especially the Internet, in the teaching of labor relations. Existing and potential examples from labor relations courses and training programs are used to present three major categories of uses of technology: resources for instructors to use in preparing traditional face-to-face courses, technological enhancements for traditional c...

We develop a reciprocity-based model of wage determination and incorporate it into a modern dynamic general equilibrium framework. We estimate the model and find that, among potential determinants of wage policy, rent-sharing (between workers and firms) and a measure of wage entitlement are critical to fit the dynamic responses of hours, wages and inflation to various exogenous shocks. Aggregat...

Numerous laboratory experiments show that workers reciprocate to high wages with high effort, when there is perfect information on the surplus created. Recent field experiments, however, suggest that trust and reciprocity may be lower – or absent – when the information is incomplete. We report a laboratory experiment with symmetric and asymmetric incomplete surplus information in a “bilateral g...