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Effort and Comparison Income: Experimental and Survey Evidence

  • Clark, Andrew E.

    ()

    (Paris School of Economics)

  • Masclet, David

    ()

    (University of Rennes)

  • Villeval, Marie Claire

    ()

    (CNRS, GATE)

This paper considers the effect of status or relative income on work effort combining experimental evidence from a gift-exchange game with 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 others’ average income, suggesting that comparisons are more ordinal than cardinal. We then show that 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 and rank.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2169.

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Length: 34 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2169
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