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The effect of non-pecuniary motivations on labor supply

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  • Farzin, Y.H.

Abstract

People value work not only as a means of earning income to satisfy their consumption needs but also as a direct source of satisfaction for its socio-psychological effects (non-pecuniary benefits). I show that once non-pecuniary effects of working time are incorporated in the standard labor-supply model: (i) the wage rate under-estimates (over-estimates) the true opportunity cost of non-work/leisure time when working time has non-pecuniary benefits (costs), (ii) non-pecuniary work motivations can substitute for monetary wages as work incentives, (iii) at very low wage rates, work can become a net source of utility, and (iv) the implied shape of labor-supply curve differs starkly from those implied by standard theory. I identify conditions under which a greater non-pecuniary work motivation induces a larger supply of labor, and examine the effects of non-wage income on supplies of paid work and voluntary work when there are non-pecuniary benefits associated with both types of work.

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  • Farzin, Y.H., 2009. "The effect of non-pecuniary motivations on labor supply," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(4), pages 1236-1259, November.
    • Handle: RePEc:eee:quaeco:v:49:y:2009:i:4:p:1236-1259
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    7. Sheila M W Reddy & Theodore Groves & Sriniketh Nagavarapu, 2014. "Consequences of a Government-Controlled Agricultural Price Increase on Fishing and the Coral Reef Ecosystem in the Republic of Kiribati," PLOS ONE, Public Library of Science, vol. 9(5), pages 1-11, May.
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    11. Akay, Alpaslan & Bargain, Olivier & Jara Tamayo, H. Xavier, 2023. "Experienced versus decision utility: large-scale comparison for income-leisure preferences," LSE Research Online Documents on Economics 117746, London School of Economics and Political Science, LSE Library.
    12. John K. Dagsvik & Zhiyang Jia, 2014. "Labor supply as a discrete choice among latent jobs: Unobserved heterogeneity and identification," Discussion Papers 786, Statistics Norway, Research Department.
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