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American Economic Review: Vol. 97 No. 1 (March 2007)
AER Volume. 97, Issue 1 | 
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Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment
Article 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.97.1.298
DOI: 10.1257/aer.97.1.298
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)
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Full-text Article
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Download Data Set (99.04 KB) | Link to Appendix (888.44 KB)
Authors
Fehr, Ernst
Goette, Lorenz
Goette, Lorenz
