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Cardiovascular Consequences of Unfair Pay

Author

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  • Falk, Armin

    () (briq, University of Bonn)

  • Menrath, Ingo

    (University of Duesseldorf)

  • Verde, Pablo Emilio

    () (University of Duesseldorf)

  • Siegrist, Johannes

    () (University of Duesseldorf)

Abstract

This paper investigates physiological responses to perceptions of unfair pay. 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. In this environment unfairness can arise if an agent's reward expectation is not met. Throughout the experiment we record agents' heart rate variability. Our findings provide evidence of a link between perceived unfairness and heart rate variability. The latter is an indicator of stress-related impaired cardiac autonomic control, which has been shown to predict coronary heart diseases in the long run. Establishing a causal link between unfair pay and heart rate variability therefore uncovers a mechanism of how perceptions of unfairness can adversely affect cardiovascular health. We further test potential adverse health effects of unfair pay using data from a large representative data set. Complementary to our experimental findings we find a strong and highly significant association between health outcomes, in particular cardiovascular health, and fairness of pay.

Suggested Citation

  • Falk, Armin & Menrath, Ingo & Verde, Pablo Emilio & Siegrist, Johannes, 2011. "Cardiovascular Consequences of Unfair Pay," IZA Discussion Papers 5720, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5720
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    References listed on IDEAS

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    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 437-459.
    3. Armin Falk & James J. Heckman, 2009. "Lab Experiments are a Major Source of Knowledge in the Social Sciences," Working Papers 200935, Geary Institute, University College Dublin.
    4. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2008. "Representative Trust And Reciprocity: Prevalence And Determinants," Economic Inquiry, Western Economic Association International, vol. 46(1), pages 84-90, January.
    5. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
    6. Currie, Janet & Madrian, Brigitte C., 1999. "Health, health insurance and the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 50, pages 3309-3416 Elsevier.
    7. Herbert Gintis, 2000. "Strong Reciprocity and Human Sociality," UMASS Amherst Economics Working Papers 2000-02, University of Massachusetts Amherst, Department of Economics.
    8. Altmann, Steffen & Falk, Armin & Huffman, David B., 2010. "Implicit Contracts, Unemployment, and Labor Market Segmentation," IZA Discussion Papers 5001, Institute for the Study of Labor (IZA).
    9. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    10. Urs Fischbacher & Simon Gachter, 2010. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Goods Experiments," American Economic Review, American Economic Association, vol. 100(1), pages 541-556, March.
    11. Jürgen Schupp & Gert G. Wagner, 2002. "Maintenance of and Innovation in Long-Term Panel Studies: The Case of the German Socio-Economic Panel (GSOEP)," Discussion Papers of DIW Berlin 276, DIW Berlin, German Institute for Economic Research.
    12. Agell, Jonas & Lundborg, Per, 1995. " Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 295-307, June.
    13. repec:aph:ajpbhl:1998:88:1:68-74_4 is not listed on IDEAS
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    1. repec:qut:qubewp:wp003 is not listed on IDEAS
    2. Dulleck, Uwe & Fooken, Jonas & Newton, Cameron & Ristl, Andrea & Schaffner, Markus & Torgler, Benno, 2016. "Tax compliance and psychic costs: Behavioral experimental evidence using a physiological marker," Journal of Public Economics, Elsevier, vol. 134(C), pages 9-18.
    3. Thomas Buser & Anna Dreber & Johanna Mollerstrom, 2015. "Stress Reactions cannot explain the Gender Gap in Willingness to compete," Tinbergen Institute Discussion Papers 15-059/I, Tinbergen Institute.
    4. repec:eee:jeborg:v:141:y:2017:i:c:p:96-109 is not listed on IDEAS
    5. Jonas Fooken & Markus Schaffner, 2013. "The role of psychological and physiological factors in decision making under risk and in a dilemma," QuBE Working Papers 010, QUT Business School.
    6. repec:qut:qubewp:001 is not listed on IDEAS
    7. Carsten Sauer & Peter Valet & Stefan Liebig, 2013. "The Impact of within and between Occupational Inequalities on People's Justice Perceptions towards Their Own Earnings," SOEPpapers on Multidisciplinary Panel Data Research 567, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. repec:kap:expeco:v:20:y:2017:i:2:d:10.1007_s10683-016-9496-x is not listed on IDEAS

    More about this item

    Keywords

    fairness; social preferences; inequality; heart rate variability; health; experiments; SOEP;

    JEL classification:

    • 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
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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