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Cardiovascular Consequences of Unfair Pay

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Author Info

  • Falk, Armin

    ()
    (University of Bonn)

  • Menrath, Ingo

    (University of Duesseldorf)

  • Verde, Pablo Emilio

    ()
    (University of Duesseldorf)

  • Siegrist, Johannes

    ()
    (University of Duesseldorf)

Abstract

This paper investigates physiological responses to perceptions of unfair pay. In a simple principal agent experiment agents produce revenue by working on a tedious task. Principals decide how this revenue is allocated between themselves and their agents. In this environment unfairness can arise if an agent's reward expectation is not met. Throughout the experiment we record agents' heart rate variability. Our findings provide evidence of a link between perceived unfairness and heart rate variability. The latter is an indicator of stress-related impaired cardiac autonomic control, which has been shown to predict coronary heart diseases in the long run. Establishing a causal link between unfair pay and heart rate variability therefore uncovers a mechanism of how perceptions of unfairness can adversely affect cardiovascular health. We further test potential adverse health effects of unfair pay using data from a large representative data set. Complementary to our experimental findings we find a strong and highly significant association between health outcomes, in particular cardiovascular health, and fairness of pay.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5720.

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Length: 27 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5720

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Keywords: fairness; social preferences; inequality; heart rate variability; health; experiments; SOEP;

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References

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  1. Urs Fischbacher & Simon Gaechter, 2008. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Good Experiments," CESifo Working Paper Series 2491, CESifo Group Munich.
  2. Currie, Janet & Madrian, Brigitte C., 1999. "Health, health insurance and the labor market," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 50, pages 3309-3416 Elsevier.
  3. Agell, Jonas & Lundborg, Per, 1993. "Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Working Paper Series, Research Institute of Industrial Economics 380, Research Institute of Industrial Economics.
  4. Herbert Gintis, 2000. "Strong Reciprocity and Human Sociality," UMASS Amherst Economics Working Papers, University of Massachusetts Amherst, Department of Economics 2000-02, .
  5. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, Elsevier, vol. 71(3), pages 397-404, June.
  6. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2008. "Representative trust and reciprocity: Prevalence and determinants," Munich Reprints in Economics, University of Munich, Department of Economics 20057, University of Munich, Department of Economics.
  7. Armin Falk & James J. Heckman, 2009. "Lab Experiments are a Major Source of Knowledge in the Social Sciences," Working Papers, Geary Institute, University College Dublin 200935, Geary Institute, University College Dublin.
  8. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
  9. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  10. Ernst Fehr & Simon G�chter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
  11. Altmann, Steffen & Falk, Armin & Huffman, David B., 2010. "Implicit Contracts, Unemployment, and Labor Market Segmentation," IZA Discussion Papers 5001, Institute for the Study of Labor (IZA).
  12. Jürgen Schupp & Gert G. Wagner, 2002. "Maintenance of and Innovation in Long-Term Panel Studies: The Case of the German Socio-Economic Panel (GSOEP)," Discussion Papers of DIW Berlin 276, DIW Berlin, German Institute for Economic Research.
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Cited by:
  1. Carsten Sauer & Peter Valet & Stefan Liebig, 2013. "The Impact of within and between Occupational Inequalities on People's Justice Perceptions towards Their Own Earnings," SOEPpapers on Multidisciplinary Panel Data Research 567, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Uwe Dulleck & Jonas Fooken & Cameron Newton & Andrea Ristl & Markus Schaffner & Benno Torgler, 2012. "Tax Compliance and Psychic Costs: Behavioral Experimental Evidence Using a Physiological Marker," CREMA Working Paper Series 2012-19, Center for Research in Economics, Management and the Arts (CREMA).
  3. repec:qut:qubewp:wp003 is not listed on IDEAS
  4. Jonas Fooken & Markus Schaffner, 2013. "The role of psychological and physiological factors in decision making under risk and in a dilemma," QuBE Working Papers, QUT Business School 010, QUT Business School.
  5. repec:qut:qubewp:001 is not listed on IDEAS

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