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Cultural Diversity, Status Concerns and the Organization of Work

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Author Info
Fershtman, Chaim
Hvide, Hans K
Weiss, Yoram

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Abstract

A well-documented human tendency is to compare outcomes with others, trying to outperform them. These tendencies vary across cultures and among different individuals in a given society. The workplace is an important source for social interaction. The willingness of workers to exert effort depends on the private and social rewards that they receive in the form of wages and esteem. Workers may differ in the importance that they give to status ranking and the reference group to which they compare themselves. We explore the conditions under which, at equilibrium, firms would mix workers with different status concerns. We then discuss the effects of such cultural diversity on wages and show that, for equally productive workers, wages may vary, reflecting the different incentives that firms provide to workers with different social concerns. We show that, under plausible conditions, a more diverse workforce can increase the total output of the economy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3982.

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Date of creation: Jul 2003
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Handle: RePEc:cpr:ceprdp:3982

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Keywords: aggregate output; diversity; status concerns; wage dispersion;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  3. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May. [Downloadable!] (restricted)
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  7. Weiss, Yoram & Fershtman, Chaim, 1998. "Social status and economic performance:: A survey," European Economic Review, Elsevier, vol. 42(3-5), pages 801-820, May. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthias Kräkel, 2005. "Emotions and the Optimality of Unfair Tournaments," Discussion Papers 45, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  2. Abigail Barr & Pieter Serneels, 2004. "Wages and Reciprocity in the Workplace," Development and Comp Systems 0409064, EconWPA. [Downloadable!]
  3. Emmanuelle Auriol & Régis Renault, 2007. "Status and Incentives," THEMA Working Papers 2007-01, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
    Other versions:
  4. Dora L. Costa & Matthew E. Kahn, 2004. "Forging a New Identity: The Costs and Benefits of Diversity in Civil War Combat Units for Black Slaves and Freemen," NBER Working Papers 11013, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Robert Dur & Amihai Glazer, 2004. "Optimal Incentive Contracts when Workers envy their Boss," Tinbergen Institute Discussion Papers 04-046/1, Tinbergen Institute, revised 13 Jun 2006. [Downloadable!]
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