Reference-Dependent Preferences and the Impact of Wage Increases on Job Satisfaction: Theory and Evidence

Prior studies have found that subjects prefer an improving sequence of income over a constant sequence, even if the constant sequence offers a larger present-discounted value. However, little is known about how these preferences vary with the size of the wage payments. In each of four studies, we find a positive relationship between the preference for increasing payments and the size of the payments. We find no evidence that our measure of the decreasing marginal utility of money is associated with this relationship. Additionally, we find weak evidence in support of a theoretical prediction that the difference between the preference for increasing wage payments and the preference for increasing nonwage payments will be largest for intermediate amounts. We do not find a relationship between the preference for increasing payments and the preference for improving nonmonetary sequences. Finally, the relationship between the preference for increasing payments and the size of the payments does not appear to be sensitive to the precise specification of the increases.

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“…9 See Burchardt (2005), Di Tella, Haisken-De New, and MacCulloch (2010), Grund and Sliwka (2007), Inglehart and Rabier (1986), and Senik (2008).…”

Section: Methodsmentioning

confidence: 99%

Preference for Increasing Wages: How do People Value Various Streams of Income?

Duffy

Smith

2010

SSRN Journal

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“…A number of empirical analyses have examined whether this hypothesis holds . These studies have found that income changes from the past affect individuals' current happiness even after controlling for current income (Burchardt 2005;Clark 1999;Grund and Sliwka 2007); they also have found that comparisons with the mean income of the studied group also matter for people's happiness (Blanchflower and Oswald 2004;Clark and Oswald 1996;Ferrer-i-Carbonell 2005). …”

Section: Research Questionsmentioning

confidence: 96%

The Association Between Perceived Income Inequality and Subjective Well-being: Evidence from a Social Survey in Japan

Oshio

Urakawa

2013

Soc Indic Res

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Previous studies have shown that income inequality in society is negatively associated with individuals' subjective well-being (SWB), such as their perceived happiness and self-rated health (SRH). However, it is not realistic to assume that individuals have precise information about actual income distribution measured by the Gini coefficient or other statistical measures. In the current study, we examined how perceived income inequality, rather than actual inequality, was associated with SWB, using cross-sectional data collected from a nationwide, Internet survey conducted in Japan (N = 10,432). We also examined how this association was confounded by individuals' objective and subjective income status, considering the possibility that individuals with lower income status are more inclined to both perceive income inequality and feel unhappy/unhealthy. In our analysis, we focused on the perception of a widening income inequality (as perceived income inequality), perceived happiness and SRH (as SWB), and household income and living standards compared with one year ago and compared with others (as income status). We also controlled for personality traits. We obtained three key findings: (1) perceived income inequality was negatively associated with SWB; (2) both perceived income inequality and SWB were associated with income status; and (3) the association between perceived income inequality and SWB was attenuated after controlling for income status, but not fully for perceived happiness. These findings suggest that perceived income inequality, which links actual income inequality to SWB, should be further studied.

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“…He uses a cross section built from the first two waves of the British Household Panel Survey (BHPS) for his study. Grund and Sliwka (2007) state for the German case that job satisfaction is positively related to wage increases for white collar workers in particular.…”

Section: Theoretical Approaches and Previous Empirical Findingsmentioning

confidence: 96%

Social comparisons of wage increases and job satisfaction

Grund

Rubin

2016

Applied Economics

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Reference-Dependent Preferences and the Impact of Wage Increases on Job Satisfaction: Theory and Evidence

Cited by 64 publications

References 24 publications

Preference for Increasing Wages: How do People Value Various Streams of Income?

Preference for Increasing Wages: How do People Value Various Streams of Income?

The Association Between Perceived Income Inequality and Subjective Well-being: Evidence from a Social Survey in Japan

Social comparisons of wage increases and job satisfaction

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