Working Paper: NBER ID: w24906
Authors: Arindrajit Dube; Laura Giuliano; Jonathan S. Leonard
Abstract: We analyze how separations responded to arbitrary differences in own and peer wages at a large U.S. retailer. Regression-discontinuity estimates imply large causal effects of own wages on separations, and on quits in particular. However, this own-wage response could reflect comparisons either to market wages or to peer wages. Estimates using peer-wage discontinuities show large peer-wage effects and imply the own-wage separation response mostly reflects peer comparisons. The peer effect is driven by comparisons with higher-paid peers—suggesting concerns about fairness. Separations appear fairly insensitive when raises are similar across peers—suggesting search frictions and monopsony are relevant in this low-wage sector.
Keywords: wage disparities; employee turnover; peer comparisons; labor market; monopsony
JEL Codes: D9; D91; J01; J3; J42; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| own wages (J31) | separation rates (J12) |
| peer wages (J31) | separation rates (J12) |
| peer wages (higher-paid) (J31) | separation rates (J12) |