"The Further We Stretch the Higher the Sky" - On the Impact of Wage Increases on Job Satisfaction

Christian Grund () and Dirk Sliwka

Bonn Econ Discussion Papers from University of Bonn, Germany

Abstract: The impact of wage increases on job satisfaction is explored. First, it is empirically confirmed that current job satisfaction rises with the absolute wage level as well as with wage increases. Second, a basic job satisfaction function is constructed based on the empirical results, and theoretical implications are analyzed. Myopic maximization of such a function directly implies increasing and concave shaped wage profiles. It is shown that employees get unhappier over time staying on a certain job although wages increase, which again is empirically confirmed.

Keywords: Job satisfaction; Wage increases; Habit formation; Wage profiles; Relative utility (search for similar items in EconPapers)
JEL-codes: M54 J28 J30 M12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2003-01
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