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Effort and Comparison Income : Survey and Experimental Evidence

  • Andrew Clark

    ()

    (DELTA - Département et Laboratoire d'Economie Théorique et Appliquée - CNRS : UMR8545 - Ecole Normale Supérieure de Paris - ENS Paris - Ecole des Hautes Etudes en Sciences Sociales (EHESS))

  • David Masclet

    ()

    (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)

  • Marie-Claire Villeval

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

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

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Paper provided by HAL in its series Post-Print with number halshs-00142880.

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Date of creation: 2006
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Handle: RePEc:hal:journl:halshs-00142880
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