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Non-pecuniary Work Incentive and Labor Supply

Y. Hossein Farzin () and Ken-Ichi Akao

No 2006.21, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Recognizing that people value employment not only to earn income to satisfy their consumption needs, but also as a means to gain socio-psychological (nonpecuniary) benefits, we show that once nonpecuniary work incentives are incorporated into standard labor supply theory, (i) the wage rate under-estimates (over-estimates) the true value of nonwork/leisure time when work has nonpecuniary benefits (costs), (ii) nonpecuniary benefits can be a substitute for monetary wages as work incentives, (iii) at very low wage rates, work can become a net source of utility, and (iii) the shape of labor supply curve differs from standard theory. We also identify conditions under which a greater nonpecuniary work incentive generates a larger individual labor supply, and examine the effects of non-wage income on labor supply both for paid and voluntary work.

Keywords: Nonpecuniary incentives; Labor supply; Non-wage income; Voluntary work (search for similar items in EconPapers)
JEL-codes: D62 J22 I31 (search for similar items in EconPapers)
Date: 2006-02
New Economics Papers: this item is included in nep-lab
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Working Paper: Non-pecuniary Work Incentive and Labor Supply (2006) Downloads
Working Paper: Non-pecuniary Work Incentive and Labor Supply (2005) Downloads
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