The power of delegation: allowing workers to choose their wage

Abstract

This paper analyzes the effect of delegation on the employees’ performance in an experimental gift exchange game where employers may allow workers to choose their own wage. Our results show that workers reciprocate positively towards companies that delegate the decision of the wage, obtaining that higher effort levels are displayed when workers are free to choose their wage, even when wages chosen by employees are similar to those assigned by employers. In addition, we find that this enhancement in workers’ behavior is mainly due to the positive effect of delegation per se rather than to the “responsibility-alleviation”.