TY  - RPRT
        AU  - Au, Pak Hung
AU  - Li, King King
AU  - Zhang, Qing
AU  - Zhu, Rong
        TI  - The Hidden Costs of Choice in the Labor Market
        PY  - 2023/Nov/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 16623
        UR  - https://www.iza.org/publications/dp16623
        AB  - Freedom of choice is often thought to improve efficiency. We experimentally investigate the effect of giving workers a choice between compensation schemes with and without a CSR component (CSR/NoCSR) on labor market participation decision and work performance, compared to the alternative of exogenous assignment. Classical economic theory suggests that giving workers a choice should not reduce their performance. Our results show that there are hidden costs associated with the right of choice. When a worker is allowed to choose his or her compensation scheme, the labor market participation rate is significantly lower than when the same scheme is exogenously assigned. Work quality is also significantly lower for those who choose CSR, as well as for those who choose no CSR, than for those who are exogenously assigned to the same scheme.We propose a model of signaling with image concerns to explain why the freedom of choice may induce reduced participation and effort exertion of workers.
        KW  - choice
KW  - signaling
KW  - image concerns
KW  - corporate social responsibility
KW  - labor
KW  - experiment
        ER  -