Traditional economic research on the number of hours that one chooses to work depends largely on wage rates and total family income. However, more recent research in behavioral economics suggests that one’s relative position in the community’s income distribution could also affect hours worked. This paper investigates the effect of an individual’s relative wage will have on their actual hours worked. Relative wage is defined as how one’s wage compares to others within the same geographical region. Cross-sectional data from 2004 to 2013 is used from the Current Population Survey to estimate the traditional labor supply function with the addition of the relative wage variable. This paper uses OLS regression analysis to determine how ones hours of work changes from changes in relative income. As expected, one’s position in the wage distribution has a negative relationship on hours worked.
Giannis, Mark, "The Effect of Relative Wage on Hours Worked" (2014). Honors Projects. 127.