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Battalio_etal_Presentation - Compensated wage decrease...

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Battalio, R., L. Green and H. Kagel, "Income-Leisure Tradeoffs of Animal Workers" American Economic Review 71 (4) (September 1981): 621-632. Goal: Test the basic static labor supply model using hungry pigeons. How? -Labor ( h ) is pecking on a key -One unit of Income ( Y ) is three seconds’ access to mixed pigeon grains -The wage rate ( w ) is the amount of income generated per peck. Wages varied from .0025 (=1/400, i.e. 400 pecks required for a unit of income), to .0800 (=1/12.5, i.e. 12.5 pecks required for a unit of income). Note this is a 32-fold wage increase!) -A unit of non-labor income ( G ) is 3 seconds free access to pigeon grains.
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The experimental design and predicted results: Leisure Income ( Y ) G X Y Z Initial budget line: High wage, no free food. Second budget line:
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Unformatted text preview: Compensated wage decrease. Final budget line: Remove nonlabor income X : Initial equilibrium. Y : Equilibrium after a compensated wage decrease: MUST be to the right of point X. Z : Equilibrium after a decline in nonlabor income ( G ). If Z is to the right of Y , leisure is a normal good. Methods and Results: Four pigeons got used to the initial condition. Compensated wage increase was implemented 22 times; 19 of these times labor supply fell. The size of the response was very bird-specific and consistent within birds. In all cases, reducing free income at a fixed wage raises labor supply. Raising the wage at a fixed level of G (i.e. an uncompensated wage increase) yields a backward-bending labor supply curve....
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Battalio_etal_Presentation - Compensated wage decrease...

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