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Abstract:

cover
CEP Discussion Paper
Effort and Comparison Income: Experimental and Survey Evidence
Andrew E. Clark, David Masclet and Marie-Claire Villeval
August 2008
Paper No' CEPDP0886:
Full Paper (pdf)

JEL Classification: M54; J33; A13; C92; D63


Tags: effort; comparison income; rank; peak-end; experiments

This paper considers the effect of status or relative income on work effort, combining experimental evidence from a gift-exchange game with the analysis of multi-country ISSP survey data. We find a consistent negative effect of others’ incomes on individual effort in both datasets. The individual’s rank in the income distribution is a stronger determinant of effort than is others’ average income, suggesting that comparisons are more ordinal than cardinal. In the experiment, effort is also affected by comparisons over time: those who received higher income offers or enjoyed higher income rank in the past exert lower levels of effort for a given current income and rank.