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Reference Dependent Preferences and the Impact of Wage Increases on Job Satisfaction: Theory and Evidence Author info | Abstract | Publisher info | Download info | Related research | Statistics Christian Grund () (University of Bonn and IZA Bonn)
Dirk Sliwka () (University of Cologne and IZA Bonn)
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registered author(s):
The impact of wage increases on job satisfaction is explored theoretically and empirically. To do this, we apply a utility function that rises with the absolute wage level as well as with wage increases. It is shown that when employees can influence their wages by exerting effort, myopic utility maximization directly implies increasing and concave shaped wage profiles. Furthermore, employees get unhappier over time staying on a certain job although wages increase. Using data from 19 waves of the German Socio-Economic Panel we find empirical support for both the form of the utility function and the decreasing job satisfaction patterns.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
1879.
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Length: 29 pages
Date of creation: Dec 2005Date of revision:
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Keywords: job satisfaction wage increases wage profiles reference dependent utility habit formation loss aversion Other versions of this item:
Find related papers by JEL classification: M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation
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