Asymmetric Labor-Supply Responses to Wage Changes: Experimental Evidence from an Online Labor Market

Philipp Doerrenberg*, Denvil Duncan*, Max Löffler*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We test whether labor supply responds symmetrically to wage increases and decreases using a randomized real effort online experiment. The results show that wage increases have smaller effects on labor supply than wage decreases of equal magnitude, especially on the extensive margin where the response to a wage decrease is twice that to a wage increase. This finding suggests that labor-supply responses to wage changes are asymmetric. We discuss the potential mechanisms behind our results including standard models of labor supply, reference dependence in consumption and reciprocity.
Original languageEnglish
Article number102305
Number of pages13
JournalLabour Economics
Volume81
Early online date25 Nov 2022
DOIs
Publication statusPublished - Apr 2023

JEL classifications

  • j20 - Demand and Supply of Labor: General
  • j22 - Time Allocation and Labor Supply
  • j31 - "Wage Level and Structure; Wage Differentials"
  • d03 - Behavioral Economics: Underlying Principles

Keywords

  • labor supply
  • labor supply elasticities
  • assymetric effects of wages
  • field experiment
  • Amazon Mechanical Turk

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