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Unfair Pay and Health

Author

Listed:
  • Armin Falk
  • Fabian Kosse
  • Ingo Menrath
  • Pablo Emilio Verde
  • Johannes Siegrist

Abstract

This paper investigates physiological responses to perceptions of unfair pay. We use an integrated approach exploiting complementarities between controlled lab and representative field data. In a simple principal-agent experiment agents produce revenue by working on a tedious task. Principals decide how this revenue is allocated between themselves and their agents. Throughout the experiment we record agents' heart rate variability, which is an indicator of stress-related impaired cardiac autonomic control and has been shown to predict coronary heart diseases in the long-run. Using three measures of perceived unfairness our findings establish a link between unfair payment and heart rate variability. Building on these findings, we further test for potential adverse health effects of unfair pay using data from a large representative data set. The analysis includes cross-sectional and dynamic panel estimations. Complementary to our experimental findings we find a strong and highly significant negative association between health outcomes, in particular cardiovascular health, and the perception of unfair pay.

Suggested Citation

  • Armin Falk & Fabian Kosse & Ingo Menrath & Pablo Emilio Verde & Johannes Siegrist, 2014. "Unfair Pay and Health," SOEPpapers on Multidisciplinary Panel Data Research 715, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp715
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    References listed on IDEAS

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    Cited by:

    1. D'Ambrosio, Conchita & Clark, Andrew E. & Barazzetta, Marta, 2018. "Unfairness at work: Well-being and quits," Labour Economics, Elsevier, vol. 51(C), pages 307-316.

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    More about this item

    Keywords

    Fairness; social preferences; inequality; heart rate variability; health; experiments; SOEP;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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