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Envy in Mission-Oriented Organizations
1 : Alma Mater Studiorum University of Bologna
(UNIBO)
-
Website
Università di Bologna Via Zamboni, 33 - 40126 Bologna -
Italy
2 : Universitat de Barcelona
(UB)
According to the labor donation theory, workers adhering to the firms' mission
are willing to donate a portion of their paid labor. In this paper, we study how
workers' fairness concerns limit the firm's ability to extract labor donation from its
employees. We find that, in sectors where the firm's mission is important, optimal
contracts are such that high-ability employees perceive their wage as less fair than
low-ability employees and they must be rewarded with an “envy rent”. The oppo-
site is true in sectors where the firm's mission does not play a relevant role: here the
envious employees have low-ability. We empirically test the predictions of the model
using the German Socio-Economic Panel finding support for our theoretical results.
