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Grosswage illusion in a real effort experiment

Author

Listed:
  • Martin Fochmann

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Joachim Weimann

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Kay Blaufus

    (Free University of Frankfurt (Oder))

  • Jochen Hundsdoerfer

    (Free University Berlin)

  • Dirk Kiesewetter

    (Faculty of Economics and Management, JUlius-Maximilians University Würzburg)

Abstract

In a controlled laboratory experiment, subjects had to fold letters in order to earn money. While the net income per letter was the same in the three treatments, the gross income varied and the tax rate was 0, 25% and 50%. Although work incentives should be the same in all treatments, subjects worked harder and longer when they were taxed. We conclude that this is due to a ‘gross-wage illusion effect’. The existence of this effect demonstrates that not only the tax rate and the tax base are of importance for work incentives, but also the perception of a tax.

Suggested Citation

  • Martin Fochmann & Joachim Weimann & Kay Blaufus & Jochen Hundsdoerfer & Dirk Kiesewetter, 2010. "Grosswage illusion in a real effort experiment," FEMM Working Papers 100009, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    • Handle: RePEc:mag:wpaper:100009
    as

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    File URL: http://www.ww.uni-magdeburg.de/fwwdeka/femm/a2010_Dateien/2010_09.pdf
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    References listed on IDEAS

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    Cited by:

    1. Margit Schratzenstaller & Fanny Dellinger, 2017. "Genderdifferenzierte Lenkungswirkungen des Abgabensystems," WIFO Studies, WIFO, number 60797, April.
    2. Seeun Jung & Kenneth Houngbedji, 2014. "Shirking, Monitoring, and Risk Aversion," PSE Working Papers halshs-00965532, HAL.
    3. Seeun JUNG, 2014. "Risk Attitudes and Shirking on the Quality of Work under Monitoring: Evidence from a Real-Effort Task Experiment," THEMA Working Papers 2014-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    4. Matthias Weber & Arthur Schram, 2017. "The Non‐equivalence of Labour Market Taxes: A Real‐effort Experiment," Economic Journal, Royal Economic Society, vol. 127(604), pages 2187-2215, September.
    5. Margit Schratzenstaller & Fanny Dellinger, 2018. "Genderdifferenzierte Lenkungswirkungen des Abgabensystems auf das Arbeitsangebot," WIFO Monatsberichte (monthly reports), WIFO, vol. 91(2), pages 105-120, February.

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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