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Cardiovascular Consequences of Unfair Pay

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Author Info

  • Armin Falk
  • Ingo Menrath
  • Pablo Emilio Verde
  • Johannes Siegrist

Abstract

This paper investigates physiological responses to perceptions of unfair pay. In a simple principal agent experiment agents produce revenue by working on a tedious task. Principals decide how this revenue is allocated between themselves and their agents. In this environment unfairness can arise if an agent's reward expectation is not met. Throughout the experiment we record agents' heart rate variability. Our findings provide evidence of a link between perceived unfairness and heart rate variability.The latter is an indicator of stressrelated impaired cardiac autonomic control, which has been shown to predict coronary heart diseases in the long run. Establishing a causal link between unfair pay and heart rate variability therefore uncovers a mechanism of how perceptions of unfairness can adversely affect cardiovascular health. Wefurther test potential adverse health effects of unfair pay using data from a large representative data set. Complementary to our experimental findings we find a strong and highly significant association between health outcomes, in particular cardiovascular health, and fairness of pay.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 380.

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Length: 25 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp380

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Keywords: Fairness; social preferences; inequality; heart rate variability; health; experiments; SOEP;

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References

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  1. Agell, Jonas & Lundborg, Per, 1993. "Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Working Paper Series, Research Institute of Industrial Economics 380, Research Institute of Industrial Economics.
  2. Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series 336, CESifo Group Munich.
  3. Falk, Armin & Heckman, James J, 2010. "Lab Experiments are a Major Source of Knowledge in the Social Sciences," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7620, C.E.P.R. Discussion Papers.
  4. Urs Fischbacher & Simon Gaechter, 2008. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Good Experiments," CESifo Working Paper Series 2491, CESifo Group Munich.
  5. Jürgen Schupp & Gert G. Wagner, 2002. "Maintenance of and Innovation in Long-Term Panel Studies: The Case of the German Socio-Economic Panel (GSOEP)," Discussion Papers of DIW Berlin 276, DIW Berlin, German Institute for Economic Research.
  6. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2008. "Representative Trust And Reciprocity: Prevalence And Determinants," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 46(1), pages 84-90, 01.
  7. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
  8. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(2), pages 437-59, May.
  9. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, Elsevier, vol. 71(3), pages 397-404, June.
  10. Janet Currie & Brigitte C. Madrian, 1998. "Health, Health Insurance and the Labor Market," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 27, Northwestern University/University of Chicago Joint Center for Poverty Research.
  11. Herbert Gintis, 2000. "Strong Reciprocity and Human Sociality," UMASS Amherst Economics Working Papers, University of Massachusetts Amherst, Department of Economics 2000-02, University of Massachusetts Amherst, Department of Economics.
  12. Altmann, Steffen & Falk, Armin & Huffman, David B., 2010. "Implicit Contracts, Unemployment, and Labor Market Segmentation," IZA Discussion Papers 5001, Institute for the Study of Labor (IZA).
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Cited by:
  1. repec:qut:qubewp:001 is not listed on IDEAS
  2. Carsten Sauer & Peter Valet & Stefan Liebig, 2013. "The Impact of within and between Occupational Inequalities on People's Justice Perceptions towards Their Own Earnings," SOEPpapers on Multidisciplinary Panel Data Research 567, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Jonas Fooken & Markus Schaffner, 2013. "The role of psychological and physiological factors in decision making under risk and in a dilemma," QuBE Working Papers, QUT Business School 010, QUT Business School.
  4. Uwe Dulleck & Jonas Fooken & Cameron Newton & Andrea Ristl & Markus Schaffner & Benno Torgler, 2012. "Tax Compliance and Psychic Costs: Behavioral Experimental Evidence Using a Physiological Marker," QuBE Working Papers, QUT Business School 001, QUT Business School.
  5. repec:qut:qubewp:wp003 is not listed on IDEAS

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