Are preferences for work reference dependent or time nonseparable? New experimental evidence

2003

We use natural experiments at two firms-plausibly exogenous increases in the piece rate-to study the impact of incentives on within-day effort profiles. Our first finding is that raising the commission rate has zero effect on total effort over the day. This is similar to other studies, which show no effect, or even a negative effect of incentives on effort. However, this evidence is consistent with two competing explanations: lack or response to incentives could be due to fatigue, or it could be due to reference dependent preferences (income targeting). Distinguishing between these explanations is important for understanding what can be done to improve the effectiveness of incentives, and is important because reference dependent preferences may affect the allocation of effort in a broader array of work environments. In this paper we are able to distinguish between these explanations, because our data are richer than previous studies' and allow us to look closely at within-day effort profiles. Although we find that a higher piece rate has zero net effect on daily effort, we find a strong effect on the way that effort is allocated within the day. On the higher piece rate, workers exert significantly more effort early in the day, but work significantly less hard later in the day. We show that this pattern is difficult to explain with fatigue: a broad class of fatigue functions predicts a non-negative response of effort to incentives at all points during the day. Furthermore, some plausible forms of fatigue predict that effort should increase most strongly at the end of the day, which is the opposite of what we observe. The effort profiles we observe are, however, consistent with a model in which workers have reference-dependent preferences and a salient daily income goal. We conclude that reference-dependent preferences are important for understanding daily labor supply.

Applied Economics, 2019

In this article, we look at explanations for why people want to change their working hours. We focus on the role of income and differentiate between the effect of household income, personal income and self-perceived relative income. Using Flemish data on 1435 workers, we perform binary logistic regressions in which we compare those who are over-or underemployed with those who are currently working their preferred number of hours. Our results show that the desire to work fewer hours is mostly related to a bad work-life balance, while the wish to increase working hours is associated with relative income rather than absolute income. Based on our findings we recommend governments to not only focus on increasing flexibility at the individual level but to also consider these positional effects by taking measures (e.g. decreasing the duration of the standard working week) at the population level.

2021

This study jointly examines agents' time dependence-period effects within instantaneous utility-and time preference-behavior on discounting future utility. The study considers the start-and end-of-period effects for time dependence and exponential and hyperbolic discounting for time preference. It provides identification arguments and sufficient conditions for both time constructs. The data include agents' work-shift schedules and daily observations in response to a firm's non-linear compensation structure, in which the final payment depends on the history of performance. By illustrating how various time constructs jointly affect behavior, the study provides implications for designing compensation structure and employee-shift scheduling. Specifically, it disentangles the effects of time constructs to examine the effectiveness of long versus short quota-evaluation cycles, quota-bonus versus commission incentive schemes, and employee-shift scheduling. In addition, the study provides a field validation that compares post-analysis actual and counterfactual outcomes to validate the prediction accuracy of the model.

This paper investigates the incentive effects of an hourly wage on the supply of time and effort. First, I consider the framework typically used in the labor supply literature and analyze the influence of the wage rate on the supply of time and effort separately. To compare the kind of incentives the wage rate generates regarding the supply of each dimension of work activity, I rewrite the effects of the wage rate on the supply of effort into the traditional income-substitution effects. This generates new insights on the incentive effects of this payment scheme on the effort level and allows us to discuss some results described in the efficiency wage literature. In a second stage, I consider the more general framework in which the worker can choose both the time and effort dimensions of her work activity. The outcomes of the analysis show that, in contrast to what has been suggested in the literature, a backward-bending labor(-time) supply schedule cannot appear without the presence of an income effect – but that this case can take place when we consider the effective labor supply function.

2002

European Centre for Analysis in the Social Sciences. ECASS is an interdisciplinary research centre which hosts major research programmes and helps researchers from the EU gain access to longitudinal data and cross-national datasets from all over Europe.

SSRN Electronic Journal, 2014

Various European studies show that the majority of those employed wish to work fewer hours than they actually do. The question addressed here is whether imbalanced working hoursworking hour tensions -influence changes in behavior: do preferences transmit into reality? Based on a Danish longitudinal time-use study, we find that more Danes prefer shorter working hours over longer working hours, which is in contrast to the Americans. Moreover, not only do the vast majority of overworked Danes adjust their working hours, those who are underworked also do so within a decade. Factors behind these changes are analyzed and means to ensure an optimization of time-and money-related wellbeing are discussed.

Journal of Economic Issues, 2005

This paper assesses recent controversy over the length of the working day in the light of the philosophical conceptions of agency offered by neoclassical, institutionalist and Marxian economists. It is suggested that rational-choice explanations offered by neoclassical economists put a misleading emphasis on the individual agent. In particular, the hours people work, which are modelled in terms of individual choice by neoclassical economists, are in fact often imposed on workers coercively. Both Marxian and institutionalist economists have recognized the role of power in socioeconomic systems. These themes lend weight to the central thesis in this paper;

SSRN Electronic Journal, 2000

Traditional welfare analyses based on money income needs to be broadened by its time dimension. In the course of time the traditional full-time work is diminishing and new labour arrangements are discussed (keyword: flexible labour markets).

Economic Modelling, 2006

Journal of Human resources, 1992

Most models of implicit lifetime contracts imply that at any particular point in time, workers' wages and value of marginal product (VMP) will diverge. As a result, the contract will have to specify hours as well as wages, since firms will desire to prevent workers from working more when the wage is greater than VMP and from working less when the wage is less than VMP. this divergence, combined with the fact that in efficient contracts, the hours are set so that VMP equals the marginal value of leisure, implies that workers will face binding hours constraints. We show that the two major models of lifetime contracts, the agency model and the firm-specific capital model, make opposite predictions regarding the relation between work hours constraints and job tenure. We test these predictions. Our results indicate that neither model of efficient long-term contracts explains the observed pattern of hours constraints. Therefore, we briefly consider other explanations.