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Do workers work more if wages are high? Evidence from a randomized field experiment


Fehr, Ernst; Goette, Lorenz (2007). Do workers work more if wages are high? Evidence from a randomized field experiment. American Economic Review, 97(1):298-317.

Abstract

Most previous studies on intertemporal labor supply found very small or insignificant substitution effects. It is possible that these results are due to constraints on workers' labor supply choices. We conducted a field experiment in a setting in which workers were free to choose hours worked and effort per hour. We document a large positive elasticity of overall labor supply and an even larger elasticity of hours, which implies that the elasticity of effort per hour is negative. We examine two candidate models to explain these findings: a modified neoclassical model with preference spillovers across periods, and a model with reference dependent, loss-averse preferences. With the help of a further experiment, we can show that only loss-averse individuals exhibit a negative effort response to the wage increase.

Abstract

Most previous studies on intertemporal labor supply found very small or insignificant substitution effects. It is possible that these results are due to constraints on workers' labor supply choices. We conducted a field experiment in a setting in which workers were free to choose hours worked and effort per hour. We document a large positive elasticity of overall labor supply and an even larger elasticity of hours, which implies that the elasticity of effort per hour is negative. We examine two candidate models to explain these findings: a modified neoclassical model with preference spillovers across periods, and a model with reference dependent, loss-averse preferences. With the help of a further experiment, we can show that only loss-averse individuals exhibit a negative effort response to the wage increase.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:March 2007
Deposited On:09 Jun 2008 14:29
Last Modified:21 Nov 2017 13:27
Publisher:American Economic Association
ISSN:0002-8282
Additional Information:Copyright: American Economic Association
Publisher DOI:https://doi.org/10.1257/aer.97.1.298
Official URL:http://www.atypon-link.com/AEAP/doi/pdf/10.1257/aer.97.1.298

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