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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The Quarterly Journal of Economics,
Oxford University Press, vol. 112(2), pages 407-441.
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- Ernst Fehr & Lorenz Goette, 2007. "Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment," American Economic Review, American Economic Association, vol. 97(1), pages 298-317, March.
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- Henry S. Farber, 2003. "Is Tomorrow Another Day? The Labor Supply Of New York Cab Drivers," Working Papers 110, Princeton University, Department of Economics, Center for Economic Policy Studies..
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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). Full references (including those not matched with items on IDEAS)
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