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Pay, Reference Points, and Police Performance

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Author Info
Alexandre Mas
Abstract

Several theories suggest that pay raises below a reference point will reduce job performance. Final offer arbitration for police unions provides a unique opportunity to examine these theories, as the police officers either receive their requested wage or receive a lower one. In the months after New Jersey police officers lose in arbitration, arrest rates and average sentence length decline and crime reports rise relative to when they win. These declines are larger when the awarded wage is further from the police union's demand. The findings support the idea that considerations of fairness, disappointment, and, more generally, reference points affect workplace behavior.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12202.

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Date of creation: May 2006
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Handle: RePEc:nbr:nberwo:12202

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Find related papers by JEL classification:
J0 - Labor and Demographic Economics - - General
J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
D0 - Microeconomics - - General
H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gibbons, Robert, 1988. "Learning in Equilibrium Models of Arbitration," American Economic Review, American Economic Association, vol. 78(5), pages 896-912, December. [Downloadable!] (restricted)
  2. Levitt, Steven D, 1997. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime," American Economic Review, American Economic Association, vol. 87(3), pages 270-90, June. [Downloadable!] (restricted)
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  3. Ashenfelter, Orley, 1987. "Arbitrator Behavior," American Economic Review, American Economic Association, vol. 77(2), pages 342-46, May.
    Other versions:
  4. Andrew E. Clark & Yannis Georgellis, 2002. "Unemployment Alters the Set-Point for Life Satisfaction," Economics and Finance Discussion Papers 02-16, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
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  5. Orley Ashenfelter & David E. Bloom, 1983. "Models of Arbitrator Behavior: Theory and Evidence," NBER Working Papers 1149, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Justin McCrary, 2002. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime: Comment," American Economic Review, American Economic Association, vol. 92(4), pages 1236-1243, September. [Downloadable!]
  7. Agell, Jonas & Lundborg, Per, 1995. " Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(2), pages 295-307, June.
  8. 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. [Downloadable!] (restricted)
  9. Verhoogen, Eric & Burks, Stephen V. & Carpenter, Jeffrey P., 2004. "Fairness and Freight-Handlers: Local Labor-Market Conditions and Wage-Fairness Perceptions in a Trucking Firm," IZA Discussion Papers 1352, Institute for the Study of Labor (IZA). [Downloadable!]
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  10. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March. [Downloadable!] (restricted)
  11. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew & Qian, Jing, 2005. "Does Wage Rank Affect Employees’ Wellbeing?," IZA Discussion Papers 1505, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Orley Ashenfelter & Gordon B. Dahl, 2005. "Strategic Bargaining Behavior, Self-Serving Biases, and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration," NBER Working Papers 11189, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. John A. Rizzo & Richard J. Zeckhauser, 2003. "Reference Incomes, Loss Aversion, and Physician Behavior," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 909-922, December. [Downloadable!] (restricted)
  14. Robert Gibbons, 1988. "Learning in Equilibrium Models of Arbitration," Working papers 485, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Blinder, Alan S & Choi, Don H, 1990. "A Shred of Evidence on Theories of Wage Stickiness," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 1003-15, November. [Downloadable!] (restricted)
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  16. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  17. Richard E. Lucas & Andrew Clark & Yannis Georgellis & Ed Diener, 2002. "Re-Examining Adaptation and the Setpoint Model of Happiness: Reactions to Changes in Marital Status," DELTA Working Papers 2002-08, DELTA (Ecole normale supérieure). [Downloadable!]
  18. Bateman, Ian J, et al, 1997. "Does Part-Whole Bias Exist? An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 107(441), pages 322-32, March. [Downloadable!] (restricted)
  19. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-86, May. [Downloadable!] (restricted)
  20. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June. [Downloadable!] (restricted)
  21. repec:fth:prinin:219 is not listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Emma Hall & Carol Propper & John Van Reenen, 2007. "Can pay regulation kill? Panel data evidence on the effect of labor markets on hospital performance," The Centre for Market and Public Organisation 08/184, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
  2. Frederico Finan, 2009. "Vote-Buying and Reciprocity," Working Papers id:1882, esocialsciences.com. [Downloadable!]
  3. Ana Espinola-Arredondo & Felix Munoz-Garcia, 2009. "The importance of foregone options," Working Papers 2008-14, School of Economic Sciences, Washington State University. [Downloadable!]
  4. Andrew E. Clark & David Masclet & Marie-Claire Villeval, 2008. "Effort and Comparison Income: Experimental and Survey Evidence," CEP Discussion Papers dp0886, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
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