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Effort and Comparison Income : Survey and Experimental Evidence

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  • Andrew Clark
  • Davis Masclet
  • Marie-Claire Villeval

    ()
    (GATE CNRS)

Abstract

This paper combines ISSP survey data and experimental evidence from a gift-exchange game to determine the effect of status or relative income on work effort. We find a strong effect of others’ incomes on individual effort decisions in both datasets. The individual’s rank in the income distribution has a more powerful effect on effort than does others’ average income, suggesting that comparisons are more ordinal than cardinal. We further show that, controlling for own income and income rank, the width of the relevant income distribution matters, with effort increasing in the distance from the bottom of the income distribution. Last, effort is also affected by comparisons over time: those who received higher income offers or had higher income rank in the past exert lower levels of effort for a given current income

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Bibliographic Info

Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0601.

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Length: 34 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:gat:wpaper:0601

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Keywords: comparison income; effort; experiment; income distribution; peak-end; rank;

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Cited by:
  1. Jean-Yves Duclos, 2006. "Liberté ou égalité?," Cahiers de recherche 0630, CIRPEE.
  2. Jean-Yves Duclos, 2006. "Equity and Equality," Cahiers de recherche 0629, CIRPEE.
  3. Maria Fernanda Rivas & Matthias Sutter, 2008. "Wage dispersion and workers? effort," Working Papers 2008-15, Faculty of Economics and Statistics, University of Innsbruck.
  4. Abeler, Johannes & Altmann, Steffen & Kube, Sebastian & Wibral, Matthias, 2006. "Reciprocity and Payment Schemes: When Equality Is Unfair," IZA Discussion Papers 2500, Institute for the Study of Labor (IZA).
  5. Kuhnen, Camelia M. & Tymula, Agnieszka, 2008. "Rank expectations, feedback and social hierarchies," MPRA Paper 13428, University Library of Munich, Germany, revised Jan 2009.
  6. Fernanda Rivas, 2009. "Wage dispersion and workers` effort," Economics Bulletin, AccessEcon, vol. 29(2), pages 788-794.

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