The Effect of Income on the Importance of Money: Survey and Experimental Evidence

33 Pages Posted: 14 Dec 2012

See all articles by Sanford E. Devoe

Sanford E. Devoe

University of Toronto - Joseph L. Rotman School of Management

Jeffrey Pfeffer

Stanford Graduate School of Business

Byron Lee

Renmin University of China

Date Written: December 1, 2012

Abstract

The authors investigate how both the amount and source of income affects the importance placed on money using a longitudinal analysis of the British Household Panel Survey and evidence from two laboratory experiments. Larger amounts of money received for labor were associated with individuals placing greater importance on money, but this effect did not hold for money unrelated to work. The longitudinal survey analysis demonstrated these differential effects of the source of income on money’s importance while holding constant stable individual differences. The experiments provide evidence that the source of income has a causal effect on the importance of money as well as on the effort expended to earn more money. Even as individual differences in the importance placed on money may affect peoples’ income, our results suggests that, depending upon its source, income can also affect the importance people place on money.

Keywords: judgement, decision making, money, income, experiments

Suggested Citation

Devoe, Sanford E. and Pfeffer, Jeffrey and Lee, Byron, The Effect of Income on the Importance of Money: Survey and Experimental Evidence (December 1, 2012). Rotman School of Management Working Paper No. 2188645, Available at SSRN: https://ssrn.com/abstract=2188645 or http://dx.doi.org/10.2139/ssrn.2188645

Sanford E. Devoe

University of Toronto - Joseph L. Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Jeffrey Pfeffer (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Byron Lee

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

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