Working more for more and working more for less: Labor supply in the gain and loss domains

Charles Cadsby, Fei Song () and Nick Zubanov
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Fei Song: Ted Rogers School of Management, Ryerson University, Toronto ON Canada

No 2006, Working Papers from University of Guelph, Department of Economics and Finance

Abstract: We examine the response of labor supply to short-run wage changes with and without a reference wage (RW) that we manipulate experimentally. We find that, in the absence of RW, labor supply increases monotonically with wage. In contrast, when RW is present, people work more both when wages rise and fall relative to RW. These findings suggest a kink in the labor-supply curve, consistent with income targeting by loss-averse individuals. However, the effects of income targeting are sensitive to context: in a treatment where wages could either rise or fall relative to RW, the kink in the labor-supply curve disappears.

Keywords: labor supply; short-run wage changes; reference wage; loss-aversion; experimental (search for similar items in EconPapers)
JEL-codes: D91 J22 J31 M52 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020
New Economics Papers: this item is included in nep-hrm, nep-lma and nep-upt
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Journal Article: Working more for more and working more for less: Labor supply in the gain and loss domains (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:gue:guelph:2020-06

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