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Breaking Bad: When Being Disadvantaged Incentivizes (Seemingly) Risky Behavior

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  • John Gibson

    (University of Texas at El Paso)

  • David Johnson

    (University of Central Missouri)

Abstract

We investigate how variation in initial conditions, which assign individuals into advantaged or disadvantaged positions, alters behavior. We illustrate the problem within a labor market context and consider the impact of accumulated debt on wage selectivity. Using a two-period model, we show that debt exerts a non-monotonic effect on wage selectivity, with agents assigned low and high levels of debt being significantly more likely to reject an initial wage offer than agents with moderate debt. This prediction is supported by our experiment, which finds a statistically significant dip in wage selectivity for subjects assigned moderate levels of debt.

Suggested Citation

  • John Gibson & David Johnson, 2021. "Breaking Bad: When Being Disadvantaged Incentivizes (Seemingly) Risky Behavior," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 47(1), pages 107-134, January.
    • Handle: RePEc:pal:easeco:v:47:y:2021:i:1:d:10.1057_s41302-020-00172-6
    DOI: 10.1057/s41302-020-00172-6
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Debt; Wage acceptance; Amazon Mechanical Turk;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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