A Behavioral Account of the Labor Market: The Role of Fairness Concerns

Details

Serval ID
serval:BIB_DA5DF7447875
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
A Behavioral Account of the Labor Market: The Role of Fairness Concerns
Journal
Annual Review of Economics
Author(s)
Fehr E., Goette L., Zehnder C.
ISSN
1941-1383
Publication state
Published
Issued date
09/2009
Peer-reviewed
Oui
Volume
1
Pages
355-384
Language
english
Abstract
In this paper, we argue that important labor market phenomena can be better understood if one takes (a) the inherent incompleteness and relational nature of most employment contracts and (b) the existence of reference-dependent fairness concerns among a substantial share of the population into account. Theory shows and experiments confirm that, even if fairness concerns were to exert only weak effects in one-shot interactions, repeated interactions greatly magnify the relevance of such concerns on economic outcomes. We also review evidence from laboratory and field experiments examining the role of wages and fairness on effort, derive predictions from our approach for entry-level wages and incumbent workers' wages, confront these predictions with the evidence, and show that reference-dependent fairness concerns may have important consequences for the effects of economic policies such as minimum wage laws.
Keywords
Labor market, Fairness, Gift exchange, Relational contracts, Wage rigidity
Web of science
Create date
19/03/2009 15:55
Last modification date
20/08/2019 15:59
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