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Abstract:

cover
CEP discussion paper
The Motivational Cost of Inequality: Pay Gaps Reduce the Willingness to Pursue Rewards
Jan-Emmanuel De Neve, Filip Gesiarz and Tali Sharot November 2019
Paper No' CEPDP1664:
Full Paper (pdf)

JEL Classification: D31; D91; J22


Tags: inequality; pay-gaps; motivation; effort; affect; reward

Factors beyond a person’s control, such as demographic characteristics at birth, often influence the availability of rewards an individual can expect for their efforts. We know surprisingly little how such pay-gaps due to random differences in opportunities impact human motivation. To test this we designed a study in which we arbitrarly varied the reward offered to each participant in a group for performing the same task. Participants then had to decide whether or not they were willing to exert effort to receive their reward. Unfairness reduced participants’ motivation to pursue rewards even when their relative position in the distribution was high, despite the decision being of no benefit to others and reducing reward for oneself. This relationship was partially mediated by participants’ feelings. In particular, large disparity was associated with greater unhappiness, which was associated with lower willingness to work – even when controlling for absolute reward and its relative value, both of which also affected decisions to pursue rewards. Our findings suggest pay-gaps can trigger psychological dynamics that hurt productivity and well-being of all involved.