What determines individuals' preferences for efficiency over equity-based wages?

Abstract

Purpose – The paper aims to examine factors that influence individuals' preferences between wages indexed on job performance or efficiency over equity-based wages. Design/methodology/approach – Generalized linear latent and mixed models (GLLAMM) are estimated on the 2005 wave of the World Values Survey on employed individuals from 43 countries. Findings – Results suggest that employees' preference for efficiency-based wages increases with education and globalization, while it decreases with unemployment rates. Research limitations/implications – Institutions and specifically public policies that promote education, and globalization, along with policies that reduce unemployment rates could be used to promote wage setting policies that reward performance or efficiency. Originality/value – The originality of the study lies in its use of both individual- and country-level data to estimate GLLAMM that take into account the multi-level nature of the dataset. This study can inform firms and policymakers on what measures to adopt to promote preferences for efficiency-based wages among individuals.