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A Crowding-Out Effect for Relative Income

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  • Benno Torgler
  • Bruno S.Frey
  • Markus Schaffner
  • Sascha L.Schmidt

Abstract

The risk of external interventions crowding-out intrinsic motivation has long been established in economics. This paper introduces a new dimension by arguing that a crowding-out effect does become possible if individuals receive higher relative compensation. Using a unique, large data set that focuses on 26 seasons in basketball (NBA) we find empirical support for a relative crowding-out effect. Performance is reduced as a reaction to a relative income advantage.

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File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2008/236Torgler.pdf
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Bibliographic Info

Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 236.

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Length: 7 Pages
Date of creation: 23 Oct 2008
Date of revision:
Handle: RePEc:qut:dpaper:236

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Keywords: Crowding-out; relative income; positional concerns; motivation;

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  1. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
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  9. Roland Benabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Wiley Blackwell, vol. 70(3), pages 489-520, 07.
  10. George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2001. "Projection Bias in Predicting Future Utility," General Economics and Teaching 0012003, EconWPA.
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