American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment
American Economic Review
vol. 97,
no. 1, March 2007
(pp. 298–317)
Abstract
Most previous studies on intertemporal labor supply found very small or insignificant substitution effects. It is possible that these results are due to constraints on workers' labor supply choices. We conducted a field experiment in a setting in which workers were free to choose hours worked and effort per hour. We document a large positive elasticity of overall labor supply and an even larger elasticity of hours, which implies that the elasticity of effort per hour is negative. We examine two candidate models to explain these findings: a modified neoclassical model with preference spillovers across periods, and a model with reference dependent, lossaverse preferences. With the help of a further experiment, we can show that only loss-averse individuals exhibit a negative effort response to the wage increase. (JEL J22, J31)Citation
Fehr, Ernst, and Lorenz Goette. 2007. "Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment." American Economic Review, 97 (1): 298–317. DOI: 10.1257/aer.97.1.298Additional Materials
JEL Classification
- C91 Design of Experiments: Laboratory, Individual
- J22 Time Allocation and Labor Supply
- J31 Wage Level and Structure; Wage Differentials