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A Crowding-out Effect for Relative Income

  • Benno Torgler
  • Bruno S. Frey
  • Markus Schaffner
  • Sascha L. Schmidt

The risk of external interventions crowding-out intrinsic motivation has long been established in economics. This paper introduces a new dimension by arguing that a crowding-out effect does become possible if individuals receive higher relative compensation. Using a unique, large data set that focuses on 26 seasons in basketball (NBA) we find empirical support for a relative crowding-out effect. Performance is reduced as a reaction to a relative income advantage.

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Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2008-20.

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Date of creation: Sep 2008
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Handle: RePEc:cra:wpaper:2008-20
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