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The effect of economic cycles on job satisfaction in a two-sector economy

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  • Ravid, Oded
  • Malul, Miki
  • Zultan, Ro’i

Abstract

Economic growth improves the material well-being of all workers. However, when remuneration in the public sector is less sensitive to economic cycles than in the private sector, as is typically the case, economic growth will worsen the position of workers in the public sector relative to workers in the private sector, even though their income improves in absolute terms. As a result, job satisfaction may be countercyclical in the public sector. We test this counterintuitive hypothesis in a real-effort laboratory experiment that simulates an economy with two sectors differing only in their remuneration scheme. Economic cycles are introduced in order to test for their effect on job satisfaction and productivity in each sector. We find that job satisfaction in the “public” sector is negatively correlated with the state of the economy. This effect, however, does not carry over to productivity: even though an increase in a worker's productivity in the public sector reduces his relative income, in comparison to a similar private sector worker, we find that this does not have a negative effect on job satisfaction.

Suggested Citation

  • Ravid, Oded & Malul, Miki & Zultan, Ro’i, 2017. "The effect of economic cycles on job satisfaction in a two-sector economy," Journal of Economic Behavior & Organization, Elsevier, vol. 138(C), pages 1-9.
  • Handle: RePEc:eee:jeborg:v:138:y:2017:i:c:p:1-9
    DOI: 10.1016/j.jebo.2017.03.028
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    Cited by:

    1. Filiz Gülal & Adam Ayaita, 2018. "The Impact of Minimum Wages on Well-Being: Evidence from a Quasi-Experiment in Germany," SOEPpapers on Multidisciplinary Panel Data Research 969, DIW Berlin, The German Socio-Economic Panel (SOEP).

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    Keywords

    Public sector; Incentives; Subjective well being; Job satisfaction; Laboratory experiment;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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