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A Crowding-Out Effect for Relative Income

  • Benno Torgler
  • Bruno S.Frey
  • Markus Schaffner
  • Sascha L.Schmidt

The risk of external interventions crowding-out intrinsic motivation has long been established in economics. This paper introduces a new dimension by arguing that a crowding-out effect does become possible if individuals receive higher relative compensation. Using a unique, large data set that focuses on 26 seasons in basketball (NBA) we find empirical support for a relative crowding-out effect. Performance is reduced as a reaction to a relative income advantage.

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File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2008/236Torgler.pdf
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Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 236.

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Length: 7 Pages
Date of creation: 23 Oct 2008
Date of revision:
Handle: RePEc:qut:dpaper:236
Contact details of provider: Postal: GPO Box 2434, BRISBANE QLD 4001
Web page: http://www.bus.qut.edu.au/faculty/economics/
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  1. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough Or Don'T Pay At All," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 791-810, August.
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  9. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
  10. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
  11. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
  12. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
  13. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
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