Munich Personal RePEc Archive

Preference for increasing wages: How do people value various streams of income?

Duffy, Sean and Smith, John (2010): Preference for increasing wages: How do people value various streams of income?

WarningThere is a more recent version of this item available.
[img]
Preview
PDF
MPRA_paper_23559.pdf

Download (171Kb) | Preview

Abstract

Prior studies have found that subjects prefer an improving sequence of income over a constant sequence, even if the constant sequence offers a larger present discounted value. However, little is known about how these preferences vary with the size of the wage payments. In each of our three studies, we find a relationship between the preference for increasing payments and the size of the payments. Further, our measure of the shape of the utility curve is not significantly related to this behavior. Our results roughly confirm an earlier theoretical prediction that the preference for increasing wage payments will be largest for payments which are neither very likely nor very unlikely to cover the cost of effort. Finally, consistent with the literature, we find mixed evidence regarding the applicability of these time preferences in domains other than money.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.