Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234244 
Authors: 
Year of Publication: 
2021
Citation: 
[Journal:] Journal for Labour Market Research [ISSN:] 2510-5027 [Volume:] 55 [Issue:] 1 [Publisher:] Springer [Place:] Heidelberg [Year:] 2021 [Pages:] 1-17
Publisher: 
Springer, Heidelberg
Abstract: 
I examine whether reference points can provide an explanation for rigid wages in recessions. Even though a recession provides a good reason to adjust wages downward, workers' perception of a "fair wage" may depend on their previous wage, their reference point. Using a laboratory experiment, I test this idea by varying whether initially concluded contracts-and their stipulated wages-can serve as reference points. My experimental results show that with initial contracts workers punish wage cuts even in recessions, leading to considerable more rigid wages. Surprisingly, this is even true without an "objective" justification to feel entitled to initial contracts.
Subjects: 
Wage rigidity
Reference points
Gift exchange
Labor contracts
Experiments
JEL: 
C9
J3
M5
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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