Affiliation:
1. Harvard Business School
2. NBER
3. Department of Economics, Brown University
Abstract
The discourse around pay transparency has focused on partial equilibrium effects: how workers rectify pay inequities through informed renegotiation. We investigate how employers respond in equilibrium. We study a model of bargaining under two‐sided incomplete information. Our model predicts that transparency reduces the individual bargaining power of workers, leading to lower average wages. A key insight is that employers credibly refuse to pay high wages to any one worker to avoid costly renegotiations with others. When workers have low individual bargaining power, pay transparency has a muted effect. We test our model with an event‐study analysis of U.S. state‐level laws protecting the right of private sector workers to communicate salary information with their coworkers. Consistent with our theoretical predictions, transparency laws empirically lead wages to decline by approximately 2%, and wage declines are smallest in magnitude when workers have low individual bargaining power.
Subject
Economics and Econometrics
Reference72 articles.
1. Akerlof, George A., and Janet L. Yellen (1990): “The Fair Wage-Effort Hypothesis and Unemployment,” The Quarterly Journal of Economics, 105.
2. Identification of and Correction for Publication Bias
3. Commitment and observability in games
4. Baker, Michael, Yosh Halberstam, Kory Kroft, Alexandre Mas, and Derek Messacar (2021): “Pay Transparency and the Gender Gap,” American Economic Journal: Applied Economics. (Forthcoming).
5. Bennedsen, Morten, Elena Simintzi, Margarita Tsoutsoura, and Daniel Wolfenzon (2019): “Do Firms Respond to Gender Pay Gap Transparency?” The Journal of Finance.
Cited by
11 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献