Unfair Pay and Health

27 Pages Posted: 18 Dec 2014

See all articles by Armin Falk

Armin Falk

University of Bonn - Economic Science Area; briq - Institute on Behavior & Inequality

Fabian Kosse

Ludwig Maximilian University of Munich (LMU)

Ingo Menrath

Heinrich Heine University Dusseldorf

Pablo Emilio Verde

Heinrich Heine University Dusseldorf

Johannes Siegrist

Heinrich Heine University Dusseldorf

Date Written: December 2014

Abstract

This paper investigates physiological responses to perceptions of unfair pay. We use an integrated approach exploiting complementarities between controlled lab and representative field data. In a simple principal-agent experiment agents produce revenue by working on a tedious task. Principals decide how this revenue is allocated between themselves and their agents. Throughout the experiment we record agents' heart rate variability, which is an indicator of stress-related impaired cardiac autonomic control and has been shown to predict coronary heart diseases in the long-run. Using three measures of perceived unfairness our findings establish a link between unfair payment and heart rate variability. Building on these findings, we further test for potential adverse health effects of unfair pay using data from a large representative data set. The analysis includes cross-sectional and dynamic panel estimations. Complementary to our experimental findings we find a strong and highly significant negative association between health outcomes, in particular cardiovascular health, and the perception of unfair pay.

Keywords: Fairness, social preferences, inequality, heart rate variability, health, experiments, SOEP

JEL Classification: C91, D03, D63, I14

Suggested Citation

Falk, Armin and Kosse, Fabian and Menrath, Ingo and Verde, Pablo Emilio and Siegrist, Johannes, Unfair Pay and Health (December 2014). SOEPpaper No. 715, Available at SSRN: https://ssrn.com/abstract=2539101 or http://dx.doi.org/10.2139/ssrn.2539101

Armin Falk (Contact Author)

University of Bonn - Economic Science Area ( email )

briq - Institute on Behavior & Inequality

Schaumburg-Lippe-Straße 5-9
Bonn, 53113
Germany

HOME PAGE: http://www.briq-institute.org/

Fabian Kosse

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Ingo Menrath

Heinrich Heine University Dusseldorf

Universitätsstrasse 1
Duesseldorf, DE NRW 40225
Germany

Pablo Emilio Verde

Heinrich Heine University Dusseldorf

Universitätsstrasse 1
Duesseldorf, DE NRW 40225
Germany

Johannes Siegrist

Heinrich Heine University Dusseldorf ( email )

Universitätsstrasse 1
Duesseldorf, DE NRW 40225
Germany

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