Cultural Diversity, Status Concerns and the Organization of Work

Chaim Fershtman (), Yoram Weiss and Hans Hvide

No 3982, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A well-documented human tendency is to compare outcomes with others, trying to outperform them. These tendencies vary across cultures and among different individuals in a given society. The workplace is an important source for social interaction. The willingness of workers to exert effort depends on the private and social rewards that they receive in the form of wages and esteem. Workers may differ in the importance that they give to status ranking and the reference group to which they compare themselves. We explore the conditions under which, at equilibrium, firms would mix workers with different status concerns. We then discuss the effects of such cultural diversity on wages and show that, for equally productive workers, wages may vary, reflecting the different incentives that firms provide to workers with different social concerns. We show that, under plausible conditions, a more diverse workforce can increase the total output of the economy.

Keywords: Diversity; Status concerns; Aggregate output; Wage dispersion (search for similar items in EconPapers)
Date: 2003-07
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (20)

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Chapter: Cultural Diversity, Status Concerns and the Organization of Work (2006)
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