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Effort and Comparison Income : Survey and Experimental Evidence

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  • Andrew Clark
  • Davis Masclet
  • Marie-Claire Villeval

    () (GATE CNRS)

Abstract

This paper combines ISSP survey data and experimental evidence from a gift-exchange game to determine the effect of status or relative income on work effort. We find a strong effect of others’ incomes on individual effort decisions in both datasets. The individual’s rank in the income distribution has a more powerful effect on effort than does others’ average income, suggesting that comparisons are more ordinal than cardinal. We further show that, controlling for own income and income rank, the width of the relevant income distribution matters, with effort increasing in the distance from the bottom of the income distribution. Last, effort is also affected by comparisons over time: those who received higher income offers or had higher income rank in the past exert lower levels of effort for a given current income

Suggested Citation

  • Andrew Clark & Davis Masclet & Marie-Claire Villeval, 2006. "Effort and Comparison Income : Survey and Experimental Evidence," Working Papers 0601, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
  • Handle: RePEc:gat:wpaper:0601
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    Cited by:

    1. Jean-Yves Duclos, 2006. "Equity and Equality," Cahiers de recherche 0629, CIRPEE.
    2. Abeler, Johannes & Altmann, Steffen & Kube, Sebastian & Wibral, Matthias, 2006. "Reciprocity and Payment Schemes: When Equality Is Unfair," IZA Discussion Papers 2500, Institute for the Study of Labor (IZA).
    3. Duclos, Jean-Yves, 2006. "Liberté ou égalité?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 82(4), pages 441-476, décembre.
    4. Fernanda Rivas, 2009. "Wage dispersion and workers` effort," Economics Bulletin, AccessEcon, vol. 29(2), pages 788-794.
    5. Jean-Yves Duclos, 2006. "Equity and Equality," Cahiers de recherche 0629, CIRPEE.
    6. Kuhnen, Camelia M. & Tymula, Agnieszka, 2008. "Rank expectations, feedback and social hierarchies," MPRA Paper 13428, University Library of Munich, Germany, revised Jan 2009.
    7. Maria Fernanda Rivas & Matthias Sutter, 2008. "Wage dispersion and workers? effort," Working Papers 2008-15, Faculty of Economics and Statistics, University of Innsbruck.

    More about this item

    Keywords

    comparison income; effort; experiment; income distribution; peak-end; rank;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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