Procedural Unfair Wage Differentials and their Effects on Unethical Behavior

In this paper, we investigate how payment procedures that are deemed unfair can spur unethical behavior towards innocent coworkers in a real‐effort experiment. In our Discrimination treatment, a highly unfair payment procedure with wage differentials, half the workforce is randomly selected and paid by relative performance whereas the remaining receives no payment. A joy‐of‐destruction game measures unethical behavior subsequently. Non‐earners in Discrimination destroy significantly more than in the non‐discriminatory control treatments. In Discrimination , unethical behavior is generally high for all non‐earners, independent of individual inequality aversion and relative performance beliefs. In the control treatments, inequality aversion is the main driver of destructive behavior.