Loss Aversion and Labor Supply
In many occupations workersï¿½ labor supply choices are constrained by institutional rules regulating labor time and effort provision. This renders explicit tests of the neoclassical theory of labor supply difficult. Here we present evidence from studies examining labor supply responses in ï¿½neoclassical environmentsï¿½ in which workers are free to choose when and how much to work. Despite the favorable environment the results cast doubt on the neoclassical model. They are, however, consistent with a model of reference dependent preferences exhibiting loss aversion and diminishing sensitivity.
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- Ernst Fehr & Lorenz Gï¿½tte, 2005.
"Do Workers Work More if Wages are High? Evidence from a Randomized Field Experiment,"
IEW - Working Papers
125, Institute for Empirical Research in Economics - University of Zurich.
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960, California Institute of Technology, Division of the Humanities and Social Sciences.
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- repec:pri:cepsud:92farber is not listed on IDEAS
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- Fehr, Ernst & Götte, Lorenz, 2004. "Do Workers Work More When Wages Are High? Evidence from a Randomized Field Experiment," IZA Discussion Papers 1002, Institute for the Study of Labor (IZA).
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