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.

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August 2008     Paper Number CEPDP0886

Download PDF - Effort and Comparison Income: Experimental and Survey Evidence

This CEP discussion paper is published under the centre's Labour programme.