Unequal Pay, Fairness Perceptions, and Work Effort: Experimental Evidence from China

In a field experiment in China, we informed randomly selected workers that others received a higher wage for the same work. Compared to the uninformed but equally paid workers, the informed perceived their pay as less fair, but, surprisingly, increased their output without reducing quality. Although we provided no reason for the pay difference, a post-experiment survey revealed that workers developed their own, predominantly benign, explanations, the leading one (58%) being higher quality of the higher-paid workers. We validated our experimental results with a follow-up survey of 1100 people of working age in China whom we briefed about our findings and asked for their explanations. 57% believed that the informed workers perceived their higher-paid peers to be better workers and aspired to match them, and 75% stated that they would also work harder in the same situation. Our results question several predictions of fairness theory on reactions to unequal pay and hint at the importance of culture in moderating these reactions.