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Monetary Reference Points of Managers: An Empirical Investigation of Status Quo Preferences and Social Comparisons

Author

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  • Grund, Christian

    (RWTH Aachen University)

  • Martin, Johannes

    (RWTH Aachen University)

Abstract

We assemble two reference point based concepts of utility in our empirical study: the own previous status quo and social comparisons. We explore the relative relevance of these concepts for total compensation as well as for different parts of the compensation package of managers. Making use of a unique panel data set of managers of the German chemical sector, we find that social comparisons of compensation indeed affect reported job satisfaction. Managers compare their total compensation (and fixed salary) with others in the chemical sector and report lower satisfaction scores when they earn less than similar managers. We find hardly any evidence for the relevance of status quo preferences.

Suggested Citation

  • Grund, Christian & Martin, Johannes, 2012. "Monetary Reference Points of Managers: An Empirical Investigation of Status Quo Preferences and Social Comparisons," IZA Discussion Papers 7097, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7097
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    More about this item

    Keywords

    job satisfaction; reference points; social comparisons; status quo preferences; compensation;
    All these keywords.

    JEL classification:

    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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