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"The Further We Stretch the Higher the Sky" - On the Impact of Wage Increases on Job Satisfaction

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  • Grund, Christian
  • Sliwka, Dirk

Abstract

The impact of wage increases on job satisfaction is explored. First, it is empirically confirmed that current job satisfaction rises with the absolute wage level as well as with wage increases. Second, a basic job satisfaction function is constructed based on the empirical results, and theoretical implications are analyzed. Myopic maximization of such a function directly implies increasing and concave shaped wage profiles. It is shown that employees get unhappier over time staying on a certain job although wages increase, which again is empirically confirmed.

Suggested Citation

  • Grund, Christian & Sliwka, Dirk, 2003. ""The Further We Stretch the Higher the Sky" - On the Impact of Wage Increases on Job Satisfaction," Bonn Econ Discussion Papers 1/2003, University of Bonn, Bonn Graduate School of Economics (BGSE).
    • Handle: RePEc:zbw:bonedp:12003
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    Cited by:

    1. Christian Grund & Dirk Sliwka, 2007. "Reference-Dependent Preferences and the Impact of Wage Increases on Job Satisfaction: Theory and Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(2), pages 313-335, June.
    2. Claudia Senik & Andrew E. Clark, 2007. "La croissance rend-elle heureux ? La réponse des données subjectives," Working Papers halshs-00588314, HAL.
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    5. Verme, Paolo, 2013. "The relative income and relative deprivation hypotheses : a review of the empirical literature," Policy Research Working Paper Series 6606, The World Bank.
    6. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    7. Federico Traversa, 2015. "Income and the stability of democracy: Pushing beyond the borders of logic to explain a strong correlation?," Constitutional Political Economy, Springer, vol. 26(2), pages 121-136, June.
    8. Tania Burchardt, 2004. "One man's rags are another man's riches: Identifying adaptive preferences using panel data," CASE Papers 086, Centre for Analysis of Social Exclusion, LSE.
    9. Martina Mys�kov� & Jiř� Večern�k, 2013. "Job satisfaction across Europe: differences between and within regions," Post-Communist Economies, Taylor & Francis Journals, vol. 25(4), pages 539-556, December.
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    More about this item

    Keywords

    Job satisfaction; Wage increases; Habit formation; Wage profiles; Relative utility;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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