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Status, Relative Pay, and Wage Growth: Evidence from M&A

  • Illoong Kwon

    ()

    (Department of Economics, State University of New York at)

  • Eva M. Meyersson Milgrom

    ()

    (Stanford University)

We use evidence from worker turnover following M&A events to show that workers’ choices to leave the firm depend on changes in workers’ relative standing, or status, in terms of wage and rank. Our results show that social, rather than pecuniary, preference drives these choices. We also show that social preference varies with reference group. When worker's expected status within a group of co-workers in the same occupation increases, workers are less likely to quit. In contrast, when workers’ expected status compared to all workers within the same firm increases, they are more likely to quit. Moreover, for workers who lose status during M&A, the loss of social rewards is compensated by faster wage growth, suggesting a market for status.

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File URL: http://www-siepr.stanford.edu/repec/sip/07-026.pdf
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Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 07-026.

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Date of creation: Apr 2007
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Handle: RePEc:sip:dpaper:07-026
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  1. Bruno S. Frey & Alois Stutzer, . "What can Economists Learn from Happiness Research?," IEW - Working Papers 080, Institute for Empirical Research in Economics - University of Zurich.
  2. Fershtman, Chaim & Murphy, Kevin M & Weiss, Yoram, 1996. "Social Status, Education, and Growth," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 108-32, February.
  3. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  4. Daniel J. ZIZZO & Andrew J. OSWALD, 2001. "Are People Willing to Pay to Reduce Others'Incomes?," Annales d'Economie et de Statistique, ENSAE, issue 63-64, pages 39-65.
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