TY  - RPRT
        AU  - Carpenter, Jeffrey P.
AU  - Matthews, Peter Hans
AU  - Robbett, Andrea
        TI  - Compensating Differentials in Experimental Labor Markets
        PY  - 2015/Jan/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 8820
        UR  - https://www.iza.org/publications/dp8820
        AB  - The theory of compensating differentials has proven difficult to test with observational data: the consequences of selection, unobserved firm and worker characteristics, and the broader macroeconomic environment complicate most analyses. Instead, we construct experimental, real-effort labor markets and offer an evaluation of the theory in a controlled setting. We study both the wage differentials that evolve between firms with varying degrees of disamenity and how these differentials are affected by worker mobility and therefore selection. Consistent with the theory, we find that riskier firms must pay significantly higher wages to attract workers. Further, when workers are mobile, they sort into firms according to their attitudes towards risk and, as a result, the compensating differential shrinks. Last, we are also able to mimic the biases associated with observational studies.
        KW  - risk aversion
KW  - real effort
KW  - experiment
KW  - sorting
KW  - compensating differential
KW  - ambiguity aversion
KW  - loss aversion
        ER  -