Asymmetric labor-supply responses to wage-rate changes : evidence from a field experiment


Doerrenberg, Philipp ; Duncan, Denvil ; Löffler, Max


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URL: https://ub-madoc.bib.uni-mannheim.de/40603
URN: urn:nbn:de:bsz:180-madoc-406033
Document Type: Working paper
Year of publication: 2016
The title of a journal, publication series: ZEW Discussion Papers
Volume: 16-006
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: J22 , J31 , D03,
Keywords (English): Labor supply , loss aversion , labor supply elasticities w.r.t. wages
Abstract: The standard labor-supply literature typically assumes that the labor supply response to wage increases is the same as that for equivalent wage decreases. However, evidence from the behavioral-economics literature suggests that people are loss averse and thus perceive losses differently than gains. This behavioral insight may imply that workers respond differently to wage increases than to wage decreases. We estimate the effect of wage increases and decreases on labor supply using a randomized field experiment with workers on Amazon's Mechanical Turk. The results provide evidence that wage increases have smaller effects than wage decreases, suggesting that the labor-supply response to wage changes is asymmetric. This finding is especially strong on the extensive margin where the elasticity for a wage decrease is twice that for a wage increase. These findings suggest that a reference-dependent utility function that incorporates loss aversion is the most appropriate way to model labor supply.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Doerrenberg, Philipp ; Duncan, Denvil ; Löffler, Max (2016) Asymmetric labor-supply responses to wage-rate changes : evidence from a field experiment. Open Access ZEW Discussion Papers Mannheim 16-006 [Working paper]
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