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

Do higher wages elicit reciprocity and lead to increased productivity? In a field experiment with 266 employees, we find that paying higher wages, per se, does not have a discernible effect on productivity in a context with no future employment opportunities. However, structuring a portion of the wage as a clear and unexpected gift—by offering an unconditional raise after the employee has accepted the contract—leads to higher productivity for the duration of the job. Gifts are roughly as efficient as hiring more workers.

This paper was accepted by Uri Gneezy, behavioral economics.