Are Notions of Fairness Path‐Dependent? Experimental Evidence from an Efficiency‐Wage Environment

We extend the study of efficiency‐wage environments via laboratory experiments in three ways. First, we introduce exogenous shocks that increase the opportunity for rejection of the gift‐exchange outcome. These additional tests emerge since we carefully derive a series of theoretical predictions so that support for efficiency wages requires much more than simply observing that wage and effort levels exceed what would emerge with competition. Second, we focus on how the exogenous shocks can affect how both suppliers and demanders of labour view what is fair. Finally, we provide evidence to bolster our confidence in the applicability of the payroll tax side liability equivalence proposition in public economics.