A Case for Pay Secrecy

Research output: Contribution to journalArticlepeer-review

Abstract

In this paper, we study a labor market setup in which workers exhibit relative remuneration concerns with respect to their peers. We first characterize the optimal labor contract offered by the firm and provide necessary and sufficient conditions for the desirability of incorporating pay-secrecy clauses in such a contract. We then demonstrate that, in contrast to conventional wisdom viewing wage-secrecy arrangements as detrimental for workers, the latter may, in fact, gain from the lackof pay transparency.

Original languageAmerican English
Pages (from-to)268-299
Number of pages32
JournalAmerican Law and Economics Review
Volume25
Issue number1
DOIs
StatePublished - 1 Jan 2023

All Science Journal Classification (ASJC) codes

  • Finance
  • Law

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