Only If You Pay Me More: Field Experiments Support Compensating Wage Differentials Theory

61 Pages Posted: 22 Oct 2015

See all articles by Claus C. Pörtner

Claus C. Pörtner

Seattle University - Albers School of Business and Economics; Center for Studies in Demography and Ecology

Nail Hassairi

University of Washington - Department of Economics

Michael Toomim

Invisible College, LLC.

Date Written: October 20, 2015

Abstract

Compensating wage differentials is Adam Smith’s idea that wage differences equalize differences in job and worker characteristics. Other than risk of death, however, no job characteristics have consistently been found to affect wages, likely because of problems with self-selection and unobservable job characteristics. We run experiments in an online labor market, randomizing offered pay and job characteristics, thereby overcoming both problems. We find, as predicted by our model, that increasing job disamenities significantly reduces both likelihood of working and amount of work supplied. Correspondingly, the wage increases necessary to compensate workers for worse job disamenities are substantial, supporting the theory.

JEL Classification: J3, J2

Suggested Citation

Pörtner, Claus C. and Hassairi, Nail and Toomim, Michael, Only If You Pay Me More: Field Experiments Support Compensating Wage Differentials Theory (October 20, 2015). Available at SSRN: https://ssrn.com/abstract=2676905 or http://dx.doi.org/10.2139/ssrn.2676905

Claus C. Pörtner (Contact Author)

Seattle University - Albers School of Business and Economics ( email )

901 12th Avenue
Seattle, WA 98122
United States
206-296-2539 (Phone)

HOME PAGE: http://www.clausportner.com

Center for Studies in Demography and Ecology ( email )

206 Raitt Hall
Box 353412
Seattle, WA 98195-3412
United States

Nail Hassairi

University of Washington - Department of Economics ( email )

Box 353330
Seattle, WA 98195-3330
United States

Michael Toomim

Invisible College, LLC. ( email )

Seattle, WA 98102
United States

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