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Effort and comparison income: Survey and experimental evidence

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  • Andrew E. Clark

    (IZA - Institute for the Study of Labor - IZA, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

  • David Masclet

    (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie)

  • Marie Claire Villeval

    ()
    (IZA - Institute for the Study of Labor - IZA, GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I (UCBL))

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 PSE Working Papers with number halshs-00590552.

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Date of creation: Jan 2006
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Handle: RePEc:hal:psewpa:halshs-00590552

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

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Citations

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Cited by:
  1. Jean-Yves Duclos, 2006. "Liberté ou égalité?," Cahiers de recherche, CIRPEE 0630, CIRPEE.
  2. Maria Fernanda Rivas & Matthias Sutter, 2008. "Wage dispersion and workers? effort," Working Papers, Faculty of Economics and Statistics, University of Innsbruck 2008-15, Faculty of Economics and Statistics, University of Innsbruck.
  3. 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).
  4. Jean-Yves Duclos, 2006. "Equity and Equality," Cahiers de recherche, CIRPEE 0629, CIRPEE.
  5. Fernanda Rivas, 2009. "Wage dispersion and workers` effort," Economics Bulletin, AccessEcon, vol. 29(2), pages 788-794.
  6. Kuhnen, Camelia M. & Tymula, Agnieszka, 2008. "Rank expectations, feedback and social hierarchies," MPRA Paper 13428, University Library of Munich, Germany, revised Jan 2009.

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