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 difŽ cult. 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 EconWPA in its series Method and Hist of Econ Thought with number 0409003.
Length: 13 pages
Date of creation: 29 Sep 2004
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Note: Type of Document - pdf; pages: 13
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labor supply; loss aversion; neoclassical environments;
Other versions of this item:
- Götte, Lorenz & Huffman, David & Fehr, Ernst, 2003. "Loss Aversion and Labor Supply," IZA Discussion Papers 927, Institute for the Study of Labor (IZA).
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-18 (All new papers)
- NEP-BEC-2004-10-18 (Business Economics)
- NEP-LAB-2004-10-18 (Labour Economics)
- NEP-LTV-2004-10-18 (Unemployment, Inequality & Poverty)
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.:
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- 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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