Loss Aversion and Labor Supply
AbstractIn many occupations workers’ labor supply choices are constrained by institutional rules regulating labor time and effort provision. This renders explicit tests of the neoclassical theory of labor supply difficult. Here we present evidence from studies examining labor supply responses in “neoclassical environments” in which workers are free to choose when and how much to work. Despite the favorable environment the results cast doubt on the neoclassical model. They are, however, consistent with a model of reference dependent preferences exhibiting loss aversion and diminishing sensitivity.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 927.
Length: 23 pages
Date of creation: Nov 2003
Date of revision:
Publication status: published in: Journal of the European Economic Association, 2004, 2 (2-3), 216-228
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Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- Ernst Fehr & David Huffman & Lorenz Goette, 2004. "Loss Aversion And Labor Supply," Method and Hist of Econ Thought 0409003, EconWPA.
- Lorenz Goette & David Huffman & Ernst Fehr, . "Loss Aversion and Labor Supply," IEW - Working Papers 178, Institute for Empirical Research in Economics - University of Zurich.
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
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- Ernst Fehr & Lorenz Goette, 2007.
"Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment,"
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"Labor Supply of New York City Cab Drivers: One Day At A time,"
960, California Institute of Technology, Division of the Humanities and Social Sciences.
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- Gerald S. Oettinger, 1999. "An Empirical Analysis of the Daily Labor Supply of Stadium Vendors," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 360-392, April.
- Henry Farber, 2003. "Is Tomorrow Another Day? The Labor Supply of New York Cab Drivers," NBER Working Papers 9706, National Bureau of Economic Research, Inc.
- Fehr, Ernst & Götte, Lorenz, 2004. "Do Workers Work More When Wages Are High? Evidence from a Randomized Field Experiment," IZA Discussion Papers 1002, Institute for the Study of Labor (IZA).
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