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Effort and Comparison Income: Experimental and Survey Evidence

  • Andrew E. Clark
  • David Masclet
  • Marie-Claire Villeval

This paper considers the effect of status or relative income on work effort, combining experimental evidence from a gift-exchange game with the analysis of multi-country ISSP survey data. We find a consistent negative effect of others' incomes on individual effort in both datasets. The individual's rank in the income distribution is a stronger determinant of effort than is others' average income, suggesting that comparisons are more ordinal than cardinal. In the experiment, effort is also affected by comparisons over time: those who received higher income offers or enjoyed higher income rank in the past exert lower levels of effort for a given current income and rank.

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File URL: http://cep.lse.ac.uk/pubs/download/dp0886.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0886.

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Date of creation: Aug 2008
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Handle: RePEc:cep:cepdps:dp0886
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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