Zoe Cullen is an Assistant Professor in the Entrepreneurial Management Unit at HBS. Her interests are in the design of labor markets and the choices of employers and labor platforms that affect matters of public interest, such as pay transparency, pay inequality and criminal background screening.
Salary negotiations are a widespread phenomenon that can shape important labor market outcomes such as worker welfare, inequality, and the gender pay gap. Using survey and experimental data from job seekers in the U.S. tech sector, we investigate the role of information frictions in salary negotiations. We find that many workers refrain from negotiating due to uncertainty about whether employers are open to bargaining. A light-touch information treatment significantly increases negotiation attempts and compensation gains, particularly among those who underestimate how common negotiations are. A second treatment arm shows that negotiation expertise is less important for understanding why some individuals do not attempt to negotiate. We develop a theoretical model incorporating risk and information frictions, which rationalizes our empirical findings and provides insights into welfare and policy implications. Our results suggest that policies promoting negotiation could enhance labor market efficiency and pay equity.
Joint with with Bobak Pakzad-Hurson and Ricardo Perez-Truglia