Demotivating Workers: Retrenchment of pension rights and negative reciprocity

This paper identifies the causal impact of a retrenchment of pension rights on the job motivation of negatively reciprocal workers. The paper complements the evidence from lab experiments that highlight the behavioral relevance of reciprocity in stylized labor markets. We use unique matched survey and administrative data that include individual measures of reciprocity. Our data set covers male employees in the public sector in the Netherlands who faced an unexpected major pension reform in 2006, which was initiated by the government. We compare job motivation of employees who were born in 1950 and therefore face a substantial retrenchment of their pension rights to job motivation of slightly older employees who remain entitled to generous pension benefits. We find that job motivation declines among negatively reciprocal individuals who face the unexpected drop of pension rights, while we do not observe a negative treatment effect among non-reciprocal employees. Positively reciprocal inclinations do not trigger differences in job motivation between the treatment and control group.