Do employees care about their relative income position? Behavioral evidence focusing on performance in professional team sport

Objective Do employees care about their relative (economic) position in comparison to their co-workers in an organization? And if so, does it raise or lower their performance? While the topic is widely discussed in the literature, behavioral evidence on these important questions is relatively rare. Methods This article explores the pay-performance relationship using a sports data set. The strength of analyzing such data is that sports tournaments take place in a very controlled environment that helps to isolate a relative income effect. Results Using two large unique data sets that cover 26 seasons in basketball and eight seasons in soccer (Bundesliga), we find considerable support for the idea that a relative income disadvantage is correlated with a decrease in individual performance. In addition, there does not seem to be any tolerance for income disparity based on the hope that such differences may signal that better times are ahead. Conclusions This suggests the need to consider the impact of the relative income position when designing pay-for-performance mechanisms within firms and teams.

Entry into motherhood: The effect of wages

Using the ECHP, we explored the determinants of having the first child in Spain. Our main goal was to study the relation between female wages and the decision to enter motherhood. Since the offered wage of non-working women is not observed, we estimate it and impute a potential wage to each woman (working and non-working). This potential wage enable us to investigate the effect of wages (the opportunity cost of time non-worked and dedicated to children) on the decision to have the first child, for both workers and non-workers. Contrary to previous results, we found that female wages are positively related to the likelihood of having the first child. This result suggests that the income effect overcomes the substitution effect when non-participants opportunity cost is also taken into account.

Income and bargaining effects on education and health

In this paper, we examine the impacts of the reform in the rural pension system in Brazil in 1991 on schooling and health indicators. In addition, we use the reform to investigate the validity of the unitary model of household allocation by testing if there were uneven impacts on those indicators depending on the gender of the recipient. The main conclusion of the paper is that the reform had significantly positive effects on the outcomes of interest, especially on those co-residing with a male pensioner, indicating that the unitary model is not a well-specified framework to understand family allocation decisions. The highest impacts were on school attendance for boys, literacy for girls and illness for middle-age people. We explore a collective model as defined by Chiappori (1992) as one possible alternative representation for the decision-making process of the poor rural Brazilian families. In the cooperative Nash equilibrium, the reform effects can be divided into two pieces: a direct income effect and bargaining power effect. The data support the existence of these two different effects

Do positional concerns destroy social capital : evidence from 26 countries

Research on the effects of positional concerns on individuals' attitudes and behavior is sorely lacking. To address this deficiency, we use the International Social Survey Programme 1998 data on 25,000 individuals from 26 countries to investigate the impact of relative income position on three facets of social capital: horizontal and vertical trust as well as norm compliance. Testing relative deprivation theory, we identify a deleterious positional income effect for persons below the reference income, particularly for their social trust and confidence in secular institutions. Also often a social capital-lowering effect of relative income advantage occurs, while a rise in absolute income almost always contributes positively. These results indicate that a rise in income inequality in a society too large is rather detrimental to the formation of social capital. (JEL Z130, I300, D310)

How Important Are Intergenerational Transfers of Time? a Macroeconomic Analysis.

This paper examines the implications of intergenerational transfers of time and money for labor supply and capital accumulation. Although intergenerational transfers of time in the form of grandparenting are as substantial as monetary transfers in the data, little is known about the role and importance of time transfers. In this paper, we calibrate an overlapping generations model extended to allow for both time and monetary transfers to the US economy. We use simulations to show that time transfers have important positive effects on capital accumulation and that these effects can be as significant as those of monetary transfers. However, while time transfers increase the labor supply of the young, monetary transfers produce an income effect that tends to decrease work effort. We also find that child care tax credits have little impact on parental time and money transfers, but that a universal child tax credit would increase the welfare of the rich while the poor would benefit from a means-tested program.

Unemployment insurance in the presence of an informal sector

We study the effect of UI benefits in a typical developing country where the informal sector is sizeable and persistent. In a partial equilibrium environment, ruling out the macroeconomic consequences of UI benefits, we characterize the stationary equilibrium of an economy where policyholders may be employed in the formal sector, short-run unemployed receiving UI benefits or long-run unemployed without UI benefits. We perform comparative static exercises to understand how UI benefits affect unemployed worker´s effort to secure a formal job, their labor supply in the informal sector and leisure time. Our model reveals that an increase in UI benefits generates two opposing effects for the short-run unemployed. First, since search efforts cannot be monitored it generates moral hazard behaviours that lower effort. Second, it generates an income effect as it reduces the marginal cost of searching for a formal job and increases effort.The overall effect is ambiguous and depends on the relative strength of these two effects. Additionally, we show that an increase in UI benefits increases the efforts of long-run unemployed workers. We provide a simple simulation exercise which suggests that the income effect pointed out is not necessarily of second-order importance in comparison with moral hazard strength. This result softens the widespread opinion, usually based on the microeconomic/partial equilibrium argument that the presence of dual labor markets is an obstacle to providing UI in developing countries.

Will rising household incomes solve China's micronutrient deficiency problems?

Rapid economic growth in China has resulted in substantially improved household incomes. Diets have also changed, with a movement away from traditional foods and towards animal products and processed foods. Yet micronutrient deficiencies, particularly for calcium and vitamin A, are still widespread in China. In this research we model the determinants of the intakes of these micronutrients using household panel data, asking particularly whether continuing income increases are likely to cause the deficiencies to be overcome. Nonparametric kernel regressions and random effects panel regression models are employed. The results show a statistically significant but relatively small positive income effect on both nutrient intakes. The local availability of milk is seen to have a strong positive effect on intakes of both micronutrients. Thus, rather than relying on increasing incomes to overcome deficiencies, supplementary government policies, such as school milk programmes, may be warranted.

Old-age benefits and retirement decisions of rural elderly in Brazil

I estimate the impact of social security benefits on retirement decisions of rural workers by studying changes in the roles governing social security in Brazil. I focus on a 1991 reform, which brought a reduction in the minimum eligibility age for males and females, a doubling of benefit values and the extension of benefits to non-heads of households. Because beneficiaries are not subject to means or retirement tests, I estimate apure income effect. I find that a reduction in the minimum eligibility age for old-age benefits was an important determinant in the reduction in labor supply of elderly rural workers in Brazil. Finally, I find that benefit take-up rates are larger among the better educated, but least-schooled workers show the largest labor supply responses to the reform.

International real business cycles : a re-visit

It is well known that several quantitative properties of international real business cycle models with are at odds with the data. First, the cross-country correlations are much higher for consumption than for output, while in the data the opposite is true (the BKK puzzle). Second, cross-country correlations of employment and investment are negative, while in the data they are positive. This paper quantitatively shows that preferences with a zero income effect on labor supply help generate a correct cross-country correlation in employment even without any restrictions on financial markets. In a bond economy, a zero income effect in labor supply, combined with time-to-build investment, can generate a positive cross-country correlation in investment, and the BKK puzzle is also resolved when the inter-temporal elasticity of substitution in labor supply is low.

Determinants of Financial Development across the Mediterranean. MEDPRO Technical Report No. 29/February 2013

Casual observation shows that that the financial systems in the southern and eastern Mediterranean are unable (or unwilling) to divert the financial resources that are available to them as funding opportunities to private enterprises. Using a sample of both northern and southern Mediterranean countries for the years 1985 to 2009, this study empirically assesses the reasons underlying such conditions. The results show that strong legal institutions, good democratic governance and adequate implementation of financial reforms can have a substantial positive impact on financial development only when they are present collectively. Moreover, inflation appears to undermine banking development, but less so when the capital account is open. Government debt growth appears to weaken credit growth, which confirms that public debt ‘crowds out’ private debt. Lastly, capital inflows appear to primarily have an income effect, increasing income and thereby national savings, and thus increasing the availability of credit.

Modelling and estimating models of physician labour supply and productivity

Ma thèse s’intéresse aux politiques de santé conçues pour encourager l’offre de services de santé. L’accessibilité aux services de santé est un problème majeur qui mine le système de santé de la plupart des pays industrialisés. Au Québec, le temps médian d’attente entre une recommandation du médecin généraliste et un rendez-vous avec un médecin spécialiste était de 7,3 semaines en 2012, contre 2,9 semaines en 1993, et ceci malgré l’augmentation du nombre de médecins sur cette même période. Pour les décideurs politiques observant l’augmentation du temps d’attente pour des soins de santé, il est important de comprendre la structure de l’offre de travail des médecins et comment celle-ci affecte l’offre des services de santé. Dans ce contexte, je considère deux principales politiques. En premier lieu, j’estime comment les médecins réagissent aux incitatifs monétaires et j’utilise les paramètres estimés pour examiner comment les politiques de compensation peuvent être utilisées pour déterminer l’offre de services de santé de court terme. En second lieu, j’examine comment la productivité des médecins est affectée par leur expérience, à travers le mécanisme du "learning-by-doing", et j’utilise les paramètres estimés pour trouver le nombre de médecins inexpérimentés que l’on doit recruter pour remplacer un médecin expérimenté qui va à la retraite afin de garder l’offre des services de santé constant. Ma thèse développe et applique des méthodes économique et statistique afin de mesurer la réaction des médecins face aux incitatifs monétaires et estimer leur profil de productivité (en mesurant la variation de la productivité des médecins tout le long de leur carrière) en utilisant à la fois des données de panel sur les médecins québécois, provenant d’enquêtes et de l’administration. Les données contiennent des informations sur l’offre de travail de chaque médecin, les différents types de services offerts ainsi que leurs prix. Ces données couvrent une période pendant laquelle le gouvernement du Québec a changé les prix relatifs des services de santé. J’ai utilisé une approche basée sur la modélisation pour développer et estimer un modèle structurel d’offre de travail en permettant au médecin d’être multitâche. Dans mon modèle les médecins choisissent le nombre d’heures travaillées ainsi que l’allocation de ces heures à travers les différents services offerts, de plus les prix des services leurs sont imposés par le gouvernement. Le modèle génère une équation de revenu qui dépend des heures travaillées et d’un indice de prix représentant le rendement marginal des heures travaillées lorsque celles-ci sont allouées de façon optimale à travers les différents services. L’indice de prix dépend des prix des services offerts et des paramètres de la technologie de production des services qui déterminent comment les médecins réagissent aux changements des prix relatifs. J’ai appliqué le modèle aux données de panel sur la rémunération des médecins au Québec fusionnées à celles sur l’utilisation du temps de ces mêmes médecins. J’utilise le modèle pour examiner deux dimensions de l’offre des services de santé. En premierlieu, j’analyse l’utilisation des incitatifs monétaires pour amener les médecins à modifier leur production des différents services. Bien que les études antérieures ont souvent cherché à comparer le comportement des médecins à travers les différents systèmes de compensation,il y a relativement peu d’informations sur comment les médecins réagissent aux changementsdes prix des services de santé. Des débats actuels dans les milieux de politiques de santé au Canada se sont intéressés à l’importance des effets de revenu dans la détermination de la réponse des médecins face à l’augmentation des prix des services de santé. Mon travail contribue à alimenter ce débat en identifiant et en estimant les effets de substitution et de revenu résultant des changements des prix relatifs des services de santé. En second lieu, j’analyse comment l’expérience affecte la productivité des médecins. Cela a une importante implication sur le recrutement des médecins afin de satisfaire la demande croissante due à une population vieillissante, en particulier lorsque les médecins les plus expérimentés (les plus productifs) vont à la retraite. Dans le premier essai, j’ai estimé la fonction de revenu conditionnellement aux heures travaillées, en utilisant la méthode des variables instrumentales afin de contrôler pour une éventuelle endogeneité des heures travaillées. Comme instruments j’ai utilisé les variables indicatrices des âges des médecins, le taux marginal de taxation, le rendement sur le marché boursier, le carré et le cube de ce rendement. Je montre que cela donne la borne inférieure de l’élasticité-prix direct, permettant ainsi de tester si les médecins réagissent aux incitatifs monétaires. Les résultats montrent que les bornes inférieures des élasticités-prix de l’offre de services sont significativement positives, suggérant que les médecins répondent aux incitatifs. Un changement des prix relatifs conduit les médecins à allouer plus d’heures de travail au service dont le prix a augmenté. Dans le deuxième essai, j’estime le modèle en entier, de façon inconditionnelle aux heures travaillées, en analysant les variations des heures travaillées par les médecins, le volume des services offerts et le revenu des médecins. Pour ce faire, j’ai utilisé l’estimateur de la méthode des moments simulés. Les résultats montrent que les élasticités-prix direct de substitution sont élevées et significativement positives, représentant une tendance des médecins à accroitre le volume du service dont le prix a connu la plus forte augmentation. Les élasticitésprix croisées de substitution sont également élevées mais négatives. Par ailleurs, il existe un effet de revenu associé à l’augmentation des tarifs. J’ai utilisé les paramètres estimés du modèle structurel pour simuler une hausse générale de prix des services de 32%. Les résultats montrent que les médecins devraient réduire le nombre total d’heures travaillées (élasticité moyenne de -0,02) ainsi que les heures cliniques travaillées (élasticité moyenne de -0.07). Ils devraient aussi réduire le volume de services offerts (élasticité moyenne de -0.05). Troisièmement, j’ai exploité le lien naturel existant entre le revenu d’un médecin payé à l’acte et sa productivité afin d’établir le profil de productivité des médecins. Pour ce faire, j’ai modifié la spécification du modèle pour prendre en compte la relation entre la productivité d’un médecin et son expérience. J’estime l’équation de revenu en utilisant des données de panel asymétrique et en corrigeant le caractère non-aléatoire des observations manquantes à l’aide d’un modèle de sélection. Les résultats suggèrent que le profil de productivité est une fonction croissante et concave de l’expérience. Par ailleurs, ce profil est robuste à l’utilisation de l’expérience effective (la quantité de service produit) comme variable de contrôle et aussi à la suppression d’hypothèse paramétrique. De plus, si l’expérience du médecin augmente d’une année, il augmente la production de services de 1003 dollar CAN. J’ai utilisé les paramètres estimés du modèle pour calculer le ratio de remplacement : le nombre de médecins inexpérimentés qu’il faut pour remplacer un médecin expérimenté. Ce ratio de remplacement est de 1,2.

The causal effect of income on health: Evidence from German reunification

We investigate whether therewas a causal effect of income changes on the health satisfaction of East and West Germans in the years following reunification. Our data source is the German Socio-Economic Panel (GSOEP) between 1984 and 2002, and we fit a recently proposed fixed-effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition.We find evidence of a significant positive effect of income changes on health satisfaction, but the quantitative size of this effect is small. This is the case with respect to current income and a measure of ‘permanent’ income.

Involvement in environmental causes, does the joint effect between subjective income and the performance of the country matter?

Previous research has shown that richer people are more likely to engage in an environmentalcause. We extend it by considering the joint effect between subjective income and a set of macroeconomicvariables. For doing so, we employ the fifth wave of the World Values Survey (WVS).This study provides clear evidence that even when both factors matter, people´s attitudes cruciallydepend on the interaction effect. Hence, those measures that affect the characteristics of thecountry would also change the disposition to be involved.