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Joint Labor Economics, Public Economics & Policy Analysis and Management Workshop - Amalia Miller

Mon, 05/08/2017 - 11:15am

Amalia Miller

University of Virginia

115 Ives Hall

"Workplace Competition and Labor Supply: A Field Experiment"

Professional careers with the highest compensation levels and growth rates tend to require both long work hours and competition among coworkers for pay and promotion. Large literatures in personnel and experimental economics have studied the effects of tournaments on effort, but the focus has been on the intensive margin of effort per unit of work time. This paper presents a novel field experiment design in which workers are allowed to determine both the levels of effort and time they invest on a computer task. This enables us to investigate the effects of tournament competition among coworkers on labor supply, which can shed light on the non-technological factors that contribute to the prevalence of long work hours in certain occupations. 

We find that workers randomly assigned to a bonus scheme with a $30 tournament prize for the person with the highest output in their group (of four people in the same room) work substantially harder and longer than those not offered a bonus. This is true despite the fact that some workers in the non-bonus groups stay longer than the minimum time without any explicit incentives to do so. The increase in labor supply induced by paying a tournament bonus was large enough to lower the firm’s labor costs per unit of output or effort. 

We also find similar overall increases in worker effort and reductions in marginal labor costs from bonuses with a lower tournament prize (of $15) or a piece rate paid to all workers (with an equal per point bonus cost to firms). This consistency supports the general importance of financial incentives on work hours, but it also masks gender differences. Although men and women both increased their effort in response to the $30 tournament, the male reaction was substantially larger. Women tended to react similarly to each of the bonus schemes, but men had a clear ordering, with the biggest reaction to the high-prize tournament and smallest reaction to the low-prize tournament. These results indicate that workplace competition produces gender gaps in outcomes both through direct effects on labor supply and indirectly by increasing the work hours needed to succeed in elite professional careers. 

 

Event Categories: Labor Economics