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Pay Growth, Fairness and Job Satisfaction : Implications for Nominal and Real Wage Rigidity

  • Smith, Jennifer C

    (Department of Economics, University of Warwick)

Theories of wage rigidity often rely on a positive relationship between pay changes and utility, arising from concern for fairness or gift exchange. Supportive evidence has emerged from laboratory experiments, but the link has not yet been established with field data. This paper contributes a fist step, using representative British data. Workers care about the level and the growth of earnings. Below-median wage increases lead to an insult e¤ect except when similar workers have real wage reductions or fim production is falling. Nominal pay cuts appear insulting even when the firm is doing badly. JEL codes: J33 ; M52 ; J28 ; E24

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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 1009.

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Date of creation: 2013
Date of revision:
Handle: RePEc:wrk:warwec:1009
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  1. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does relative income matter? Are the critics right?," LSE Research Online Documents on Economics 28594, London School of Economics and Political Science, LSE Library.
  2. Gabriella Conti & Stephen Pudney, 2008. "If you're happy and you know it, clap your hands! Survey design and the analysis of satisfaction," Working Papers 016, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
  3. Holden, Steinar & Wulfsberg, Fredrik, 2007. "Downward nominal wage rigidity in the OECD," Working Paper Series 0777, European Central Bank.
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  7. Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages C176-95, March.
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  10. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  11. Cohn, Alain & Fehr, Ernst & Herrmann, Benedikt & Schneider, Frédéric, 2011. "Social Comparison in the Workplace: Evidence from a Field Experiment," IZA Discussion Papers 5550, Institute for the Study of Labor (IZA).
  12. Crawford, Vincent P. & Meng, Juanjuan, 2008. "New York City Cabdrivers' Labor Supply Revisited: Reference-Dependence Preferences with Rational-Expectations Targets for Hours and Income," University of California at San Diego, Economics Working Paper Series qt94w5n6j9, Department of Economics, UC San Diego.
  13. Daiji Kawaguchi & Fumio Ohtake, 2004. "Testing the Morale Theory of Nominal Wage Rigidity," ISER Discussion Paper 0602, Institute of Social and Economic Research, Osaka University.
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  16. William Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark Schweitzer & Jarkko Turunen & Melanie Ward, 2007. "How Wages Change: Micro Evidence from the International Wage Flexibility Project," CSEF Working Papers 171, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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  25. Sebastian Kube & Michel André Maréchal & Clemens Puppe, 2010. "Do wage cuts damage work morale? Evidence from a natural field experiment," IEW - Working Papers 471, Institute for Empirical Research in Economics - University of Zurich, revised Oct 2011.
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  32. Alexandre Mas, 2006. "Pay, Reference Points, and Police Performance," NBER Working Papers 12202, National Bureau of Economic Research, Inc.
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