Loss Aversion and Labor Supply

Lorenz Götte (), David Huffman and Ernst Fehr
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Lorenz Götte: National University of Singapore
Authors registered in the RePEc Author Service: Lorenz Goette

No 927, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 difficult. 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: loss aversion; intertemporal substitution; labor supply; reference dependent preferences (search for similar items in EconPapers)
JEL-codes: B49 J22 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2003-11
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: Journal of the European Economic Association, 2004, 2 (2-3), 216-228

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Related works:
Journal Article: Loss Aversion and Labor Supply (2004)
Working Paper: LOSS AVERSION AND LABOR SUPPLY (2004)
Working Paper: Loss Aversion and Labor Supply
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