Relative Income Concerns and Labor Supply
Submission Type
Event
Expected Graduation Date
2014
Location
Room E104, Center for Natural Sciences, Illinois Wesleyan University
Start Date
4-12-2014 10:00 AM
End Date
4-12-2014 11:00 AM
Disciplines
Economics
Abstract
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 someone’s relative income will have on their actual hours worked. Relative income is defined as how one’s income compares to others within the same geographical region. Cross-sectional data from 2006 to 2013 is used from the Community Population Survey to estimate the traditional labor supply function with the addition of the relative income variable. A tobit model is used to determine how ones hours of work changes from changes in relative income. The results show no conclusive evidence for a significant effect of relative income concerns.
Relative Income Concerns and Labor Supply
Room E104, Center for Natural Sciences, Illinois Wesleyan University
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 someone’s relative income will have on their actual hours worked. Relative income is defined as how one’s income compares to others within the same geographical region. Cross-sectional data from 2006 to 2013 is used from the Community Population Survey to estimate the traditional labor supply function with the addition of the relative income variable. A tobit model is used to determine how ones hours of work changes from changes in relative income. The results show no conclusive evidence for a significant effect of relative income concerns.