The Labor Supply of Fixed-Wage Workers: Estimates from a Real Effort Experiment

20 Pages Posted: 7 Mar 2016

See all articles by Jeffrey P. Carpenter

Jeffrey P. Carpenter

Middlebury College - Department of Economics; IZA Institute of Labor Economics

Abstract

Fixed-wage workers comprise the bulk of the labor force and yet little is known about how they respond to wage changes. Given recent interest in theories of reciprocity and intrinsic motivation and their implications for effort provision, the neoclassical prediction seems less obvious today. To better understand the motivation of these workers, I estimate their labor supply using a real effort experiment. Two results stand out. First, no one theory seems to fit the pooled data. On average, people work considerably harder than the minimum but they do not respond to changes in the wage. Second, pooling the data is deceptive because there seem to be distinct types with differing responses to the wage. Most workers can be classified as reciprocal or intrinsically motivated and, indeed, these types respond as theory would predict: reciprocators return wage gifts with increased effort and extrinsic incentives crowd out motivation for intrinsic workers.

Keywords: labor supply, fixed wage, reciprocity, intrinsic motivation, real effort, experiment

JEL Classification: C91, J22

Suggested Citation

Carpenter, Jeffrey P., The Labor Supply of Fixed-Wage Workers: Estimates from a Real Effort Experiment. IZA Discussion Paper No. 9778. Available at SSRN: https://ssrn.com/abstract=2742566

Jeffrey P. Carpenter (Contact Author)

Middlebury College - Department of Economics ( email )

Munroe Hall
Middlebury, VT 05753
United States
802-443-3241 (Phone)
802-443-2084 (Fax)

HOME PAGE: http://community.middlebury.edu/~jcarpent/index.ht

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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