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LOSS AVERSION AND LABOR SUPPLY

Ernst Fehr (), David Huffman () and Lorenz Goette ()

Method and Hist of Econ Thought from EconWPA

Abstract: In many occupations, workers’ labor supply choices are constrained by institutional rules regulating labor time and effort provision. This renders explicit tests of the neoclassical theory of labor supply difŽ cult. Here we present evidence from studies examining labor supply responses in “neoclassical environments” in which workers are free to choose when and how much to work. Despite the favorable environment, the results cast doubt on the neoclassical model. They are, however, consistent with a model of reference-dependent preferences exhibiting loss aversion and diminishing sensitivity.

Keywords: labor supply; loss aversion; neoclassical environments (search for similar items in EconPapers)
JEL-codes: J22 B49 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-lab and nep-ltv
Date: 2004-09-29
Note: Type of Document - pdf; pages: 13
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http://econwpa.repec.org/eps/mhet/papers/0409/0409003.pdf (application/pdf)

Related works:
Journal Article: Loss Aversion and Labor Supply (2004) Downloads
Working Paper: Loss Aversion and Labor Supply (2003) Downloads
Working Paper: Loss Aversion and Labor Supply Downloads
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