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Title: Estimating Social Preferences and Gift Exchange with a Piece-Rate Design

Author(s): Stefano DellaVigna, John List, Ulrike M. Malmendier and Gautam Rao

Publication Date: June 2020

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Programme Area(s): Labour Economics

Abstract: We design two field experiments to estimate the nature and magnitude of workers' social preferences towards their employers. Unlike previous gift-exchange field experiments, we vary piece rates in addition to gift treatments. This piece-rate design allows us to estimate the elasticity of effort to motivation and in turn identify aspects of the workers' social preferences. The first experiment measures productivity-units of output produced in a fixed amount of time. The second experiment measures a form of labor supply-the willingness to work for extra time. Using the piece-rate treatments, we document that productivity is rather unresponsive to motivation, while labor supply is very responsive. In terms of social preferences, we document, first, that workers provide effort for their employer, but are insensitive to the return to the employer. This result is consistent with models of 'warm glow' or social norms, rather than pure altruism towards the employer. Second, while we do not detect any effect of the gifts in the productivity experiment, we find sizable positive impacts in the labor-supply experiment. We show that, at least in part, this different response to gifts is explained by different elasticities of productivity and labor supply, highlighting the importance of the piece-rate design.

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Bibliographic Reference

DellaVigna, S, List, J, Malmendier, U and Rao, G. 2020. 'Estimating Social Preferences and Gift Exchange with a Piece-Rate Design'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14931