Loss Aversion and Labor Supply

Lorenz Goette, David Huffman and Ernst Fehr

No 178, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

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; labor supply (search for similar items in EconPapers)
JEL-codes: B49 J22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
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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 (2003)
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