Reciprocity in the Labor Market: Experimental Evidence

In this paper we focus on the impact of involuntary unemployment on wage formation using experimental evidence. We use the well-known Gift Exchange Game to analyze players' interaction in a simplified job market. The aim of this paper is twofold: on the one hand, we are interested in analyzing the relation between involuntary unemployment and wages; on the other hand, we aim at understanding whether the interaction between employers and employees could be affected by reciprocity. Our results show that unemployment has a negative impact on wages. Moreover, there is a positive correlation between wage and effort.