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A Crowding-out Effect for Relative Income

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  • Benno Torgler
  • Bruno S. Frey
  • Markus Schaffner
  • Sascha L. Schmidt

Abstract

The risk of external interventions crowding-out intrinsic motivation has long been established in economics. This paper introduces a new dimension by arguing that a crowding-out effect does become possible if individuals receive higher relative compensation. Using a unique, large data set that focuses on 26 seasons in basketball (NBA) we find empirical support for a relative crowding-out effect. Performance is reduced as a reaction to a relative income advantage.

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Bibliographic Info

Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2008-20.

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Date of creation: Sep 2008
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Handle: RePEc:cra:wpaper:2008-20

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Keywords: Crowding-out; relative income; positional concerns; motivation;

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  1. George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2001. "Projection Bias in Predicting Future Utility," General Economics and Teaching 0012003, EconWPA.
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  8. Roland BĂ©nabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
  9. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
  10. Uri Gneezy & Aldo Rustichini, 2000. "A fine is a price," Natural Field Experiments 00258, The Field Experiments Website.
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  12. Canice Prendergast, 2008. "Intrinsic Motivation and Incentives," American Economic Review, American Economic Association, vol. 98(2), pages 201-05, May.
  13. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
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