Asymmetric labor-supply responses to wage-rate changes: Evidence from a field experiment
Philipp Doerrenberg,
Denvil Duncan and
Max Löffler
No 16-006, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research
Abstract:
The standard labor-supply literature typically assumes that the labor supply response to wage increases is the same as that for equivalent wage decreases. However, evidence from the behavioral-economics literature suggests that people are loss averse and thus perceive losses differently than gains. This behavioral insight may imply that workers respond differently to wage increases than to wage decreases. We estimate the effect of wage increases and decreases on labor supply using a randomized field experiment with workers on Amazon's Mechanical Turk. The results provide evidence that wage increases have smaller effects than wage decreases, suggesting that the labor-supply response to wage changes is asymmetric. This finding is especially strong on the extensive margin where the elasticity for a wage decrease is twice that for a wage increase. These findings suggest that a reference-dependent utility function that incorporates loss aversion is the most appropriate way to model labor supply.
Keywords: labor supply; loss aversion; labor supply elasticities w.r.t. wages (search for similar items in EconPapers)
JEL-codes: D03 J22 J31 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-exp, nep-lma and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://www.econstor.eu/bitstream/10419/126557/1/847039382.pdf (application/pdf)
Related works:
Journal Article: Asymmetric labor-supply responses to wage changes: Experimental evidence from an online labor market (2023) 
Working Paper: Asymmetric Labor-Supply Responses to Wage-Rate Changes: Evidence from a Field Experiment (2016) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:16006
Access Statistics for this paper
More papers in ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).