Wage inequality and team production: An experimental analysis

Numerous survey studies report that human resource managers curb wage inequality with the intent to avoid detrimental effects on workers’ morale. However, there exists little controlled empirical evidence demonstrating that horizontal social comparisons and wage inequality have adverse effects on worker behavior. In this paper, we present data from a laboratory experiment that studies the impact of wage inequality on participation and effort choices in team production. Overall, we do not find evidence that wage inequality has a significant impact on either participation or effort choices.