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Unformatted text preview: NBER WORKING PAPER SERIES INEQUALITY AT WORK: THE EFFECT OF PEER SALARIES ON JOB SATISFACTION David Card Alexandre Mas Enrico Moretti Emmanuel Saez Working Paper 16396 http://www.nber.org/papers/w16396 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 September 2010 We are grateful to Stefano Dellavigna, Lawrence Katz, and seminar participants at UC Berkeley, Harvard, and the Federal Reserve Bank of San Francisco for many helpful comments. We are grateful to the Center for Equitable Growth at UC Berkeley for research support. This paper reflects solely the views of the authors and not necessarily the views of the institutions they belong to, nor those of the National Bureau of Economic Research. 2010 by David Card, Alexandre Mas, Enrico Moretti, and Emmanuel Saez. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including notice, is given to the source. Inequality at Work: The Effect of Peer Salaries on Job Satisfaction David Card, Alexandre Mas, Enrico Moretti, and Emmanuel Saez NBER Working Paper No. 16396 September 2010 JEL No. J0 ABSTRACT Economists have long speculated that individuals care about both their absolute income and their income relative to others. We use a simple theoretical framework and a randomized manipulation of access to information on peers' wages to provide new evidence on the effects of relative pay on individual utility. A randomly chosen subset of employees of the University of California was informed about a new website listing the pay of all University employees. All employees were then surveyed about their job satisfaction and job search intentions. Our information treatment doubles the fraction of employees using the website, with the vast majority of new users accessing data on the pay of colleagues in their own department. We find an asymmetric response to the information treatment: workers with salaries below the median for their pay unit and occupation report lower pay and job satisfaction, while those earning above the median report no higher satisfaction. Likewise, below-median earners report a significant increase in the likelihood of looking for a new job, while above-median earners are unaffected. Our findings indicate that utility depends directly on relative pay comparisons, and that this relationship is non-linear. David Card Department of Economics 549 Evans Hall, #3880 University of California, Berkeley Berkeley, CA 94720-3880 and NBER email@example.com Alexandre Mas Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544 and NBER firstname.lastname@example.org Enrico Moretti University of California, Berkeley Department of Economics 549 Evans Hall Berkeley, CA 94720-3880 and NBER email@example.com Emmanuel Saez Department of Economics University of California, Berkeley 549 Evans Hall #3880 Berkeley, CA 94720 and NBER firstname.lastname@example.org 1...
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