Do Workers Enjoy Procedural Utility?

Abstract

People are likely to obtain utility not only from actual outcomes, but also from the conditions which lead to these outcomes. This paper empirically tests the notion of procedural utility for the context of work relationships. Using a large survey among British workers, we find substantial procedural effects on the utility workers derive from their pay. Utility from pay is not only strongly influenced by economic outcomes (the pay levels workers get for given inputs), but also by the way pay is determined. The findings are robust to a series of alternative explanations.

Keywords: outcome utility, procedural utility, pay procedure, work relationship, pay satisfaction

JEL Classification: D60, D63, J28, J30, M12