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Relative Pay and Labor Supply

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  • Anat Bracha
  • Uri Gneezy
  • George Loewenstein

Abstract

We examine the impact of relative wages on labor supply in a laboratory experiment. We test the hypothesis that, ceteris paribus, making a given wage high (low) relative to other wage levels will lead to an increase (decrease) in labor supply. We find that labor supply does respond significantly to relative pay, and in the expected direction. However, when a strong enough reason for the relative low pay is given, this difference disappears.

Suggested Citation

  • Anat Bracha & Uri Gneezy & George Loewenstein, 2015. "Relative Pay and Labor Supply," Journal of Labor Economics, University of Chicago Press, vol. 33(2), pages 297-315.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/678494
    DOI: 10.1086/678494
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