The effects of reciprocity and worker skill on the effort-wage relation under incomplete contracts

Prior research suggests that individuals receiving higher than market wages reciprocate with higher than enforceable levels of effort. This study examines whether the effectiveness of these reciprocity-based rewards depends on a worker's skill level. My experimental results indicate that the effort-wage relation is significantly more positive when reciprocity concerns are present. High skill workers demonstrate a less positive effort-wage relation than other workers when reciprocity concerns are absent. However, the incremental influence of reciprocity is stronger for high skill workers than for other workers. My results contribute to a better understanding of the prevalence of flat-wage contracts in practice for positions that require high skill.