Gift exchange and the separation of ownership and control

Numerous gift-exchange experiments have found a positive wage–effort relationship. In (almost) all these experiments the employer both owns and controls the firm. This paper explores to what extent the separation of ownership and control affects the wage–effort relationship. We compare the standard bilateral gift-exchange game between an owner-manager and a worker with two trilateral ones where the firm is owned by a shareholder and controlled by a manager. The wage–effort relationship is similar in all three situations. Most strikingly, workers reward higher wages with higher effort, even when the manager does not share in the firmʼs profits.