Efficiency wages in an experimental labor market

There has been recent experimental support for efficiency wage theories of the labor market. This short paper initiates the larger process of evaluating the boundary conditions of the gift- exchange phenomenon. In particular, we will see whether behavior consistent with the fair wage–effort hypothesis can emerge and be sustained under conditions in which there is (i) a nontrivial marginal cost to providing effort and (ii) increased social distance between subject and experimenter.