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Cardiovascular Consequences of Unfair Pay

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  • 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. 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.
  2. Urs Fischbacher & Simon Gaechter, 2009. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Good Experiments," Discussion Papers 2009-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  3. Janet Currie & Brigitte C. Madrian, 1998. "Health, Health Insurance and the Labor Market," JCPR Working Papers 27, Northwestern University/University of Chicago Joint Center for Poverty Research.
  4. Agell, J. & Lundborg, P., 1992. "Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Papers 1993-8, Uppsala - Working Paper Series.
  5. Armin Falk & James J. Heckman, 2009. "Lab Experiments are a Major Source of Knowledge in the Social Sciences," CESifo Working Paper Series 2894, CESifo Group Munich.
  6. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2008. "Representative trust and reciprocity: Prevalence and determenants," Munich Reprints in Economics 20058, University of Munich, Department of Economics.
  7. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  8. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers 040, Institute for Empirical Research in Economics - University of Zurich.
  9. 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).
  10. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  11. Herbert Gintis, 2000. "Strong Reciprocity and Human Sociality," UMASS Amherst Economics Working Papers 2000-02, University of Massachusetts Amherst, Department of Economics.
  12. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
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Cited by:
  1. repec:qut:qubewp:001 is not listed on IDEAS
  2. repec:qut:qubewp:wp003 is not listed on IDEAS
  3. 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).
  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 001, QUT Business School.
  5. Jonas Fooken & Markus Schaffner, 2013. "The role of psychological and physiological factors in decision making under risk and in a dilemma," QuBE Working Papers 010, QUT Business School.

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