Do Workers Benefit from Wage Transparency Rules?
54 Pages Posted: 19 Jul 2021 Last revised: 29 Mar 2023
Date Written: March 28, 2023
Abstract
Wage transparency rules arguably enable workers better to assess their contribution to firm value, allowing them to make wage demands that more accurately reflect their value for the employing firm. This paper contains a formal analysis of transparency rules and their effects on wages. We find that these rules induce firms to behave strategically with the aim of manipulating the information workers receive. We identify a large class of rules that yield an identical equilibrium outcome. For productivity distributions with decreasing (increasing) hazard rate, transparency rules increase (potentially decrease) workers’ payoff.
Keywords: wage-setting, transparency rule, payoff, strategic effect, learning effect
JEL Classification: J31, J71, K31, M51
Suggested Citation: Suggested Citation