Pay transparency and productivity

This article investigates the productivity consequences of pay transparency. Tracking research output of 20,000 US academics and leveraging staggered shocks to transparency, we show that productivity responses vary predictably based on what pay transparency reveals. We reject a hypothesis that pay transparency leads to a decline in productivity. Rather, we find that those who transparency reveals to be inequitably overcompensated subsequently increase their effort, while those inequitably undercompensated subsequently weakly decrease their effort. Controlling for such pay inequity, the simple level of pay has little effect on productivity. Our study provides one of the first field-based empirical investigations of the productivity consequences of wage transparency and points to the importance of clearly delineating the effects driven by equity as opposed to equality of rewards allocations.