Adaptation Towards Reference Values: A Non-Linear Perspective

Posted: 15 Mar 2007 Last revised: 8 Jan 2012

See all articles by Yannis Georgellis

Yannis Georgellis

University of Kent

Andros Gregoriou

Brunel Business School

Nicholas NT Tsitsianis

University of Hertfordshire

Date Written: 2008

Abstract

Using large-scale panel data, we examine the dynamics of adjustment towards reference points for key workplace attributes. We discover that an Exponential Smooth Transition Autoregressive (ESTAR) model is superior to a linear model in characterizing such a process. The speed of adjustment increases non-linearly with the distance from reference points and adjustment is faster for job satisfaction shocks compared to shocks in earnings or work hours. Our findings lend further credence to the relative utility hypothesis and highlight the inherently non-linear nature of the dynamic path of adjustment towards reference points, a previously neglected issue in the adaptation literature.

Keywords: Reference Points, Relative Utility, Adaptation, ESTAR Models, Job Satisfaction

JEL Classification: D60, I31, J60, C20

Suggested Citation

Georgellis, Yannis and Gregoriou, Andros and Tsitsianis, Nicholas NT, Adaptation Towards Reference Values: A Non-Linear Perspective (2008). Journal of Economic Behavior and Organization, Vol. 67, pp. 768-781, Available at SSRN: https://ssrn.com/abstract=970079

Yannis Georgellis (Contact Author)

University of Kent ( email )

Canterbury, Kent CT2 7PE
United Kingdom

Andros Gregoriou

Brunel Business School ( email )

Kingston Lane
Eastern Gateway Building
Uxbridge, Middlesex UB8 3PH
United Kingdom

Nicholas NT Tsitsianis

University of Hertfordshire ( email )

Business School
De Havilland Campus
Hatfield, Hertfordshire AL10 9AB
United Kingdom
01707 285549 (Phone)

HOME PAGE: http://web-apps.herts.ac.uk/uhweb/about-us/profiles/profiles_home.cfm?profile=D9F0FDED-0795-5A63-0DC

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