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Job satisfaction and co-worker wages: Status or signal?

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  • Andrew E. Clark

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, 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)

  • Nicolai Kristensen

    (University of Aarhus - University of Aarhus)

  • Niels Westergård-Nielsen

    (IZA - Institute for the Study of Labor - IZA, University of Aarhus - University of Aarhus)

Abstract

This paper uses matched employer-employee panel data to show that individual job satisfaction is higher when other workers in the same establishment are better-paid. This runs contrary to a large literature which has found evidence of income comparisons in subjective well-being. We argue that the difference hinges on the nature of the reference group. We here use co-workers. Their wages not only induce jealousy, but also provide a signal about the worker's own future earnings. Our positive estimated coefficient on others' wages shows that this positive future earnings signal outweighs any negative status effect. This phenomenon is stronger for men, and in the private sector.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00587878.

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Date of creation: Sep 2007
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Handle: RePEc:hal:wpaper:halshs-00587878

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00587878
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Related research

Keywords: job satisfaction ; co-workers ; comparison income ; wage expectations ; tournaments;

References

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  1. Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics.
  2. Farber, Henry S & Saks, Daniel H, 1980. "Why Workers Want Unions: The Role of Relative Wages and Job Characteristics," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 349-69, April.
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  18. Bewley, Truman F., 1998. "Why not cut pay?," European Economic Review, Elsevier, vol. 42(3-5), pages 459-490, May.
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  20. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
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