The History of Tipping - from Sixteenth-Century England to United States in the 1910s

Abstract

Tipping is a multi-billion-dollar phenomenon that challenges the traditional assumption of selfish economic agents who have no feelings and do not care about social norms. This paper reviews the early history of tipping and offers an economic analysis of different aspects of tipping. Using the historical evidence, it then addresses two major questions about tipping: why do people tip? And does tipping improve service quality? The reasons for tipping changed over the years, but conforming to social norms and avoiding embarrassment were generally the main reasons. Tipping seems to improve service quality; the extent of the improvement varies across occupations.

Keywords: Tipping, History, Social norms, Feelings

JEL Classification: N30, N70, J00, Z13, L80, D10