How Worker Participation Affects Reciprocity Under Minimum Remuneration Policies : Experimental Evidence

We analyze the role of worker participation for the success of minimum remuneration policies. In our experiments employers remunerate workers doing a real-effort task. We vary the way how a minimum remuneration policy is introduced. In the worker-participation treatment, workers bargain with the employer on the enforcement of the policy. In the control treatment the policy is exogenously introduced. We find a pronounced effort increase after the policy was enforced. An exogenous introduction has detrimental effects, i.e., employers frequently pay a premium to maintain performance. Thus, worker participation may be an effective means for maintaining reciprocity under minimum remuneration policies