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Loss Aversion and Labor Supply


Götte, Lorenz; Huffman, David; Fehr, Ernst (2004). Loss Aversion and Labor Supply. Working paper series / Institute for Empirical Research in Economics No. 178, University of Zurich.

Abstract

In many occupations workers’ labor supply choices are constrained by institutionalnrules regulating labor time and effort provision. This renders explicit tests of the neoclassicalntheory of labor supply difficult. Here we present evidence from studies examining labornsupply responses in “neoclassical environments” in which workers are free to choose whennand how much to work. Despite the favorable environment the results cast doubt on thenneoclassical model. They are, however, consistent with a model of reference dependentnpreferences exhibiting loss aversion and diminishing sensitivity.

Abstract

In many occupations workers’ labor supply choices are constrained by institutionalnrules regulating labor time and effort provision. This renders explicit tests of the neoclassicalntheory of labor supply difficult. Here we present evidence from studies examining labornsupply responses in “neoclassical environments” in which workers are free to choose whennand how much to work. Despite the favorable environment the results cast doubt on thenneoclassical model. They are, however, consistent with a model of reference dependentnpreferences exhibiting loss aversion and diminishing sensitivity.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:January 2004
Deposited On:29 Nov 2011 22:32
Last Modified:12 Aug 2017 12:55
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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