Breaking Bad: When Being Disadvantaged Incentivizes (Seemingly) Risky Behavior

John Gibson () and David Johnson ()

Eastern Economic Journal, 2021, vol. 47, issue 1, No 6, 107-134

Abstract: Abstract We investigate how variation in initial conditions, which assign individuals into advantaged or disadvantaged positions, alters behavior. We illustrate the problem within a labor market context and consider the impact of accumulated debt on wage selectivity. Using a two-period model, we show that debt exerts a non-monotonic effect on wage selectivity, with agents assigned low and high levels of debt being significantly more likely to reject an initial wage offer than agents with moderate debt. This prediction is supported by our experiment, which finds a statistically significant dip in wage selectivity for subjects assigned moderate levels of debt.

Keywords: Debt; Wage acceptance; Amazon Mechanical Turk (search for similar items in EconPapers)
JEL-codes: C9 D21 J31 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1057/s41302-020-00172-6

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