When Will There Be Gift Exchange? Addressing the Lab-Field Debate with Laboratory Gift Exchange Experiments

Abstract

Gift exchange experiments have demonstrated that norms can affect labor market outcomes and provided an explanation for involuntary unemployment. However, conflicting results from laboratory and field experiments have questioned the relevance of gift exchange and helped spark an ongoing debate about the relative merits of the lab and field. This paper uses laboratory experiments to identify three parameters that affect the likelihood workers engage in gift exchange, helping to reconcile results across lab and field experiments. Gift exchange is more prevalent when workers are rich relative to the firm, worker effort is efficient, or workers have a restricted action space.