Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
The Economics of Tipping
Journal of Economic Perspectives
vol. 34,
no. 2, Spring 2020
(pp. 215–36)
(Complimentary)
Abstract
Tipping involves dozens of billions of dollars annually in the US alone and is a major income source for millions of workers. But beyond its economic importance and various economic implications, tipping is also a unique economic phenomenon in that people pay tips voluntarily without any legal obligation. Tipping demonstrates that psychological and social motivations can be a substantial reason for economic behavior, and that economic models should go beyond a selfish economic agent who has no feelings in order to capture the full range of economic activities. This article discusses some aspects of tipping, with an emphasis on economic issues: the history of tipping, the main reasons for tipping, why tipping could be a welfare-increasing and sustainable social norm, the relationship between tipping and service quality, how tipping represents a struggle over rents, and issues of discrimination and sexual harassment related to tipping.Citation
Azar, Ofer H. 2020. "The Economics of Tipping." Journal of Economic Perspectives 34 (2): 215–36. DOI: 10.1257/jep.34.2.215Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- J16 Economics of Gender; Non-labor Discrimination
- J31 Wage Level and Structure; Wage Differentials
- J71 Labor Discrimination
- L83 Sports; Gambling; Restaurants; Recreation; Tourism
- Z13 Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification