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Effort and Comparison Income: Survey and Experimental Evidence

Andrew Clark (), David Masclet () and Marie Claire Villeval ()

No 601, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: This paper combines ISSP survey data and experimental evidence from a gift-exchange game to determine the effect of status or relative income on work effort. We find a strong effect of others’ incomes on individual effort decisions in both datasets. The individual’s rank in the income distribution has a more powerful effect on effort than does others’ average income, suggesting that comparisons are more ordinal than cardinal. We further show that, controlling for own income and income rank, the width of the relevant income distribution matters, with effort increasing in the distance from the bottom of the income distribution. Last, effort is also affected by comparisons over time: those who received higher income offers or had higher income rank in the past exert lower levels of effort for a given current income

Keywords: comparison income; effort; experiment; income distribution; peak-end; rank (search for similar items in EconPapers)
JEL-codes: A13 C92 D63 J33 M54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-ltv
Date: 2006-01
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Working Paper: Effort and Comparison Income: Survey and Experimental Evidence (2006) Downloads
Working Paper: Effort and comparison income: Survey and experimental evidence (2006) Downloads
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