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IZA Discussion Paper No. 8909
March 2015
Worker Morale and Effort: Is the Relationship Causal?

published in: Manchester School, 2018, 86 (6), 816-839

We investigate a unique setting which enables us to distinguish between two theories of work performance. A standard labor supply framework implies a negative effect of the non-pecuniary cost of work on the employee's effort. In contrast, a model of worker morale that is consistent with a widely used theory of Akerlof and Yellen (QJE,1990) predicts this negative effect is stronger (weaker) for low-morale (high-morale) workers. We exploit a natural experiment design of a firm relocation from Milwaukee's Central Business District to the area's suburban ring in 1992. Since the employees did not choose the location of the new plant, there is an exogenous source of variation on the adjusted commuting distance among those who stay at the firm. Some of the workers received a windfall gain, whereas other workers experienced an unforeseen cost in longer commuting time. The estimates indicate that low-morale workers are responsive to the shock in commuting time. We conclude that the results favor the model of worker morale.

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Mark Fallak
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+352 585-855-526
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Olga Nottmeyer
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+352 585-855-501
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Christina Gathmann
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The IZA@LISER Network is a global community of scholars dedicated to excellence in labor economics and related fields, now coordinated at the Luxembourg Institute of Socio-Economic Research (LISER) following its transition from Bonn.

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