|
SIGN IN
Email
This field is required Password This field is required Sign in
Remember me
Forgot ID or Password?
|
||
Do Workers Work More if Wages are High? Evidence from a Randomized Field ExperimentErnst FehrUniversity of Zurich - Department of Economics Lorenz GoetteUniversity of Lausanne; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA) September 2005 IEW Working Paper No. 125 Abstract: Most previous studies on intertemporal labor supply found very small or insignificant substitution effects. It is not clear, however, whether these results are due to institutional constraints on workers' labor supply choices or whether the behavioral assumptions of the standard life cycle model with time separable preferences are empirically invalid. We conducted a randomized field experiment in a setting in which workers were free to choose their working times and their efforts during working time. We document a large positive wage elasticity of overall labor supply and an even larger wage elasticity of labor hours, which implies that the wage elasticity of effort per hour is negative. While the standard life cycle model cannot explain the negative effort elasticity, we show that a modified neoclassical model with preference spillovers across periods and a model with reference dependent, loss averse preferences are consistent with the evidence. With the help of a further experiment we can show that only loss averse individuals exhibit a significantly negative effort response to the wage increase and that the degree of loss aversion predicts the size of the negative effort response.
Number of Pages in PDF File: 47 Date posted: December 11, 2002Suggested CitationContact Information
|
|
||||||||||||||||||||||||||||||||