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Job Satisfaction and Co-worker Wages: Status or Signal?

  • Clark, Andrew E.

    ()

    (Paris School of Economics)

  • Kristensen, Nicolai

    ()

    (KORA - Danish Institute for Local and Regional Government Research)

  • Westergård-Nielsen, Niels C.

    ()

    (Copenhagen Business School)

This paper uses matched employer-employee panel data to show that individual job satisfaction is higher when other workers in the same establishment are better-paid. This runs contrary to a large literature which has found evidence of income comparisons in subjective well-being. We argue that the difference hinges on the nature of the reference group. We here use co-workers. Their wages not only induce jealousy, but also provide a signal about the worker’s own future earnings. Our positive estimated coefficient on others’ wages shows that this positive future earnings signal outweighs any negative status effect. This phenomenon is stronger for men, and in the private sector.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3073.

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Length: 30 pages
Date of creation: Sep 2007
Date of revision:
Publication status: published in: Economic Journal, 2009, 119 (536), 430–447
Handle: RePEc:iza:izadps:dp3073
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