Size doesn't matter! Gift exchange in experimental labor markets

Abstract

El pdf del artículo es el documento de trabajo.We study how the number of traders affects the interaction between a centralized exchange and bilateral negotiations in an experimental labor market with excess supply and incomplete contracts. Our large markets are three times as large as our small markets. In bilateral negotiations firms obtain information about employees' performance in previous jobs. Though market forces put a downward pressure on wages in large markets, reciprocal tendencies do not differ. Hence, the occurrence of bilateral negotiations increases overall efficiency for both market sizes.Financial support by the Spanish Ministry of Science and Innovation, the Barcelona GSE research Network, CONSOLIDER-INGENIO 2010 (CSD2006-00016), the São Paulo School of Business Administration (EAESP) and the School of Economics (EESP) of the Getulio Vargas Foundation in São Paulo is gratefully acknowledged. The authors thank Fabiana D’Atri and Marcela Prada for very able research assistance