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Pay Growth, Fairness and Job Satisfaction : Implications for Nominal and Real Wage Rigidity

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  • Smith, Jennifer C

    (Department of Economics, University of Warwick)

Abstract

Theories of wage rigidity often rely on a positive relationship between pay changes and utility, arising from concern for fairness or gift exchange. Supportive evidence has emerged from laboratory experiments, but the link has not yet been established with field data. This paper contributes a fist step, using representative British data. Workers care about the level and the growth of earnings. Below-median wage increases lead to an insult e¤ect except when similar workers have real wage reductions or fim production is falling. Nominal pay cuts appear insulting even when the firm is doing badly. JEL classification: Pay cuts ; Social comparisons ; Gift exchange JEL codes: J33 ; M52 ; J28 ; E24

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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 1009.

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Date of creation: 2013
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Handle: RePEc:wrk:warwec:1009

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