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Effort and Comparison Income : Survey and Experimental Evidence

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  • Andrew Clark

    ()
    (DELTA - Département et Laboratoire d'Economie Théorique et Appliquée - CNRS : UMR8545 - Ecole Normale Supérieure de Paris - ENS Paris - Ecole des Hautes Etudes en Sciences Sociales (EHESS))

  • David Masclet

    ()
    (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)

  • Marie-Claire Villeval

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

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 HAL in its series Post-Print with number halshs-00142880.

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Date of creation: 2006
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Handle: RePEc:hal:journl:halshs-00142880

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

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Citations

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Cited by:
  1. Maria Fernanda Rivas & Matthias Sutter, 2008. "Wage dispersion and workers? effort," Working Papers 2008-15, Faculty of Economics and Statistics, University of Innsbruck.
  2. Duclos, Jean-Yves, 2006. "Liberté ou égalité?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 82(4), pages 441-476, décembre.
  3. Duclos, Jean-Yves, 2006. "Equity and Equality," IZA Discussion Papers 2284, Institute for the Study of Labor (IZA).
  4. Abeler, Johannes & Altmann, Steffen & Kube, Sebastian & Wibral, Matthias, 2006. "Reciprocity and Payment Schemes: When Equality Is Unfair," Ratio Working Papers 109, The Ratio Institute.
  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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