Kurs "Behavioral Labor Economics"

Prof. Dr. Armin Falk

I. Introduction (Slides)
	a.    Advances in Behavioral Economics, ed. By Colin C. Camerer, G. Loewenstein and M. Rabin, Princeton University Press 2004.
	b.    Falk, A., Fehr, E., Why Labour Market Experiments, Labour Economics 10 (2003) 399-406.
II. Psychology of incentives (Slides)
	a.    Reciprocity and contract enforcement
		i.    Fehr, E., Falk, A., 2002. Psychological Foundations of Incentives, European Economic Review 46, 687-724.
		ii.    Fehr, E., Gächter, S., Kirchsteiger, G., 1997. Reciprocity as a contract enforcement device - experimental evidence. Econometrica 65, 833-860.
		iii.    Gächter, S., Falk, A., 2002. Reputation and Reciprocity - Consequences for the Labour Relation, in: Scandinavian Journal of Economics 104 (2002), 1-26.
		iv.    Fehr, E., Klein, A., Schmidt, K.M., 2001. Fairness, incentives and contractual incompleteness. Working Paper No. 72, Institute for Empirical Research in Economics, University of Zurich.
	b.    Dysfunctional effects of explicit incentives
		i.     Falk, A., Kosfeld, M., 2004. Trust and Incomplete Contracts
		ii.    Gneezy, U., Rustichini, A., 2000a. A Fine is a price. Journal of Legal Studies 29, 1-17.
		iii.    Gneezy, U., Rustichini, A., 2000b. Pay enough or don't pay at all. Quarterly Journal of Economics 115 (2), 791-810.
		iv.    Gneezy, U. 2004. The W effect of incentives. The University of Chicago Graduate School of Business.
		v.    E. Fehr, Rockenbach, B., 2002. Detrimental effects of sanctions on human altruism, NATURE 422, 15 March 2002, 137-140.
	c.    Peer effects
		i.    Falk, A., Ichino, A. 2003. Clean evidence on peer effects. IZA Discussion paper 732.
		ii.    Ichino A. and G. Maggi, 2000. Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm. Quarterly Journal of Economics 115 (2000), 1057-1090.
		iii.    Zajonc, Robert B., "Social Facilitation", Science 149 (1965), 269-274.
	d .    Loss aversion, collusion and sabotage in the presence of tournament incentives
		i.    Bull, C., Schotter, A., Weigelt, K., 1987. Tournaments and piece rates: an experimental study. Journal of Political Economy 95, 1-33.
		ii.    Falk, A., Fehr, E. 2002. The Power and Limits of Tournament Incentives, unpublished manuscript.
		iii.    Harbring, C., Irlenbusch, B., 2003. An experimental study on tournament design. Labour Economics 10, 443-464.
III. Labor supply (Slides1, Slides2)
		i.    Camerer, C., Babcock, L., Loewenstein, G., Thaler, R., 1997. Labor Supply of New York City Cabdrivers: One Day at a Time, The Quarterly Journal of Economics (1997): 407-441.
		ii.    Fehr, Götte, Do Workers Work More if Wages are High? Evidence from a Randomized Field Experiment. IEW Working Paper No. 125.
		iii.    Goette, Lorenz and David Huffman (2003), Reference-Dependent Preferences and the Allocation of Effort over Time: Evidence from Natural Experiments, Mimeo. Institute for Empirical Research in Economics, University of Zurich.
IV. Market behavior (Slides)
	a.    Monopsony and minimum wages
		i.    Card, David and Krueger, Alan B. 1994. Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania. The American Economic Review, Vol. 84, no. 4, 772-793.
		ii.    Falk, A., Fehr, E., Zehnder, C., 2004. The Behavioral Effects of Minimum Wages, Working paper.
	b.    Fairness, efficiency wages and wage rigidities
		i.    Fehr, E., Kirchsteiger, G., Riedl, A., 1993. Does fairness prevent market clearing? An experimental investigation. Quarterly Journal of Economics 58, 437-460.
		ii.    Fehr, E. and Falk, A. 1999. Wage Rigidity in a Competitive Incomplete Contract Market. Journal of Political Economy 10. 106-134.
	c.    Incomplete contracts, fairness and the functioning of markets
		i.    Brown, M., Falk, A., Fehr, E. "Relational Contracts and the Nature of Market Interactions", Forthcoming in: Econometrica.
		ii.    Kirchsteiger, G., Niederle, M., Potters, J. 2001. "Public versus private exchanges", Working paper 2001, Tilburg University.
		iii.    Brown, M., Falk, A., Fehr, E., 2003. Competition and Implicit Contracts. Working paper, Institute for Empirical Research in Economics, University of Zurich.

The dates for the oral exams are Friday, August 6, 2004 and Wednesday, October 6, 2004. The paper must be delivered at least one week before the oral exam. In order to arrange the oral exam please send me an email (falk@iza.org).

The papers are available at IZA.

1. Questionnaire data on social preferences and wage setting (Jan Ludwig and Lars Bünger)

Agell, Jonas and Lundborg, Per (1995): “Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms”, Scandinavian Journal of Economics, vol. 97, 295 - 307.

Bewley, T. (1999), Why Wages Don’t Fall During a Recession, Cambridge, MA: Harvard University Press.

Bewley, Truman (1995): “A Depressed Labor Market as Explained by Participants", American Economic Review 85, Papers and Proceedings, 250 - 254.

Blinder, Alan S. and Choi, Don H. (1990): “A Shred of Evidence on Theories of Wage Stickiness”, Quarterly Journal of Economics, vol. 105, 1003-1016.

Campbell III, Carl M., and Kunal S. Kamlani, “The Reasons for Wage Rigidity: Evidence from a Survey of Firms.” Quarterly Journal of Economics, 112(3), 1997, 759 - 789.

2. Intrinsic motivation

a) Marion Eberlein
R. Bénabou, J. Tirole (2003), Intrinsic and Extrinsic Motivation, Review of Economic Studies, 70(3), 489-520.

E. L. Deci (1971), The Effects of Externally Mediated Rewards on Intrinsic Motivation, in Journal of Personality and Social Psychology 18, 105-115, 1971.

b) Mirco Seite und Eric Detlev
E. L. Deci (1971), The Effects of Externally Mediated Rewards on Intrinsic Motivation, in Journal of Personality and Social Psychology 18, 105-115, 1971.

M. R. Lepper, D Greene, R. E. (1973), Nisbet Undermining Children’s Intrinsic Interest with Extrinsic Rewards: A Test of the “Over Justification” Hypothesis, in Journal of Personality and Social Psychology 28, pp. 129-137, 1973.

Deci, E.L., Koestner, R.M., Ryan, R., 1999. A meta-analytic review of experiments examining the effect of extrinsic rewards on intrinsic motivation. Psychological Bulletin 125, 627-668.

(Deci, E., Ryan, R.M., 1985. Intrinsic Motivation and Self-Determination in Human Behavior. Plenum Press, New York.)

B. J. Calder, B. M. Staw (1975), Self-perceptions of intrinsic and extrinsic motivation, in Journal of Personality and Social Psychology, Vol. 31, 599-605, 1975 .

Frey, B., and R. Jegen (2001) “Motivation Crowding Theory: A Survey of Empirical Evidence,” Journal of Economic Survey, 15(5): 589-611.

Kruglanski, A.W., Friedman, I., Zeevi, G., 1971. The effects of extrinsic incentive on some qualitative aspects of task performance. Journal of Personality 39, 606-617.


3. Tournaments and sabotage (Michael Dardi und Lisa Andrusyszyn)

E. P. Lazear (1989), Pay Equality and Industrial Politics, The Journal of Political Economy, Vol. 97, No. 3, 561-580, June 1989.

C. Bull, A. Schotter, K. Weigelt (1987), Tournaments & Piece rates, Journal of Political Economy, Vol. 95, 1-3.

C. Harbring, B. Irlenbusch (2003), Anreize zu produktiven und destruktiven Anstrengungen durch relative Entlohnung, Working Paper, Department of Economics, University of Bonn.


4. Tournaments and social preferences (Sabine Mückenhausen, Thorsten Rudolph und Marine Serzante)

C. Grund, D. Sliwka (2002); Envy and Compassion in Tournaments, Working Paper No. 647, IZA, Bonn; November 2002.

C. Bull, A. Schotter, K. Weigelt (1987), Tournaments & Piece rates, Journal of Political Economy, Vol. 95, 1-3.

Fehr, E. and K. M. Schmidt, 1999: “A Theory of Fairness, Competition and Co-operation”, Quarterly Journal of Economics 114, 817-868.

A. Falk und Urs Fischbacher (2000): “A Theory of Reciprocity”, IEW Working paper.


5. Correspondence testing, policy evaluation and discrimination (Orsolya Maier)

Armin Falk, Rafael Lalive, Josef Zweimüller (2004), The Success of Job Applications: A New Approach to Program Evaluation, IZA DP 1100.

Riach, P. A. and Rich, J. (1991), Testing for Racial Discrimination in the Labor Market, Cambridge Journal of Economics 15, 239-259.

Riach, P. A. and Rich, J. (1995), An Investigation of Gender Discrimination in Labor Hiring, Eastern Economic Journal 21, 343-356.

Weichselbaumer, D. (2004), Is it Sex or Personality? The Impact of Sex-Stereotypes on Discrimination in Applicant Selection, Eastern Economic Journal, forthcoming.


6. Social preferences and incentives - the sociological perspective (Ying Huang und Izabela Rekiel)

J. N. Baron, J. Pfeffer (1994), The Social Psychology of Organizations and Inequality, in Social Psychology Quarterly, Vol. 57, No. 3, 190-209, 1994

R. D. Pritchard, M. D. Dunnette, D. O. Jorgenson (1972), Effects of Perceptions of Equity and Inequity on Worker Performance and Satisfaction, in Journal of Applied Psychology Monograph, Vol. 56, No. 1, pp. 75-94, February 1972.

I. R. Andrews (1967), Wage Inequity and Job Performance: an Experimental Study, in Journal of Applied Psychology, Vol. 51, No. 1, 39-45.

E. E. Lawler III, P. W. O’Gara (1967), Effects of Inequity Produced by Underpayment on Work Output, Work Quality, and Attitudes Toward the Work, in Journal of Applied Psychology, Vol. 51, No. 5, pp. 403-410.


7. Motivation and incentives (Annette Meyer)

D. S. Nagin, J.B. Rebitzer, S. Sanders, L J. Taylor (2002), Monitoring, Motivation, and Management: The Determinants of Opportunistic Behavior in a Field Experiment, American Economic Review, Vol. 92, No.4, 850 – 87.3, Sept. 2002.

L. Minkler (2002), Shirking and Motivations in Firms: Survey Evidence on Worker Attitudes, Working Paper 2002-40, University of Connecticut, Sept. 2002

W. E. Encinosa III, M. Gaynor, J. B. Rebitzer (2000), The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation System, Working Paper, Carnegie Mellon University March 2000.


8. Loss aversion, reference-dependent preferences (Marta Serra und Simone Wagner)

Koszegi, Botond and Matthew Rabin (2004) “A Model of Reference-Dependent Preferences.” Working paper, UC Berkeley economics department.

Frank, Robert H. and Robert M. Hutchens (1993) “Wages, Seniority, and the Demand for Rising Consumption Profiles,” Journal of Economic Behavior and Organization.

Boone, Jan, Abdolkarim Sadrieh and Jan C. van Ours (2004) “Experiments on Unemployment Benefit Sanctions and Job Search Behavior,” IZA discussion paper no. 1000.

Heath, Larrick and Wu (1999) “Goals as Reference Points,” Cognitive Psychology, 38, 79-109.


9. Expectations and Incentives in merger (Tom McKenzie)

Knez, M. and Camerer, C., 1994. Creating Expectational Assets in the Laboratory: Coordination in Weakest-Link Games, Strategic Management Journal 15 (8), 101­119.

Montmarquette, C., Rulliere, J.-L., Villeval, M.-C. and Zeiliger, R., 2004. Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students, IZA Discussion Paper No. 1057.

Nalbatian, H. and Schotter, A., 1997. Productivity Under Group Incentives: An Experimental Study, American Economic Review 87 (3), 314-341.

Weber, R. and Camerer, C., 2003. Cultural Conflict and Merger Failure: An Experimental Approach, Management Science 49 (4), 400-415.