Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/33490
Authors: 
Grund, Christian
Sliwka, Dirk
Year of Publication: 
2005
Series/Report no.: 
IZA Discussion Papers 1879
Abstract: 
The impact of wage increases on job satisfaction is explored theoretically and empirically. To do this, we apply a utility function that rises with the absolute wage level as well as with wage increases. It is shown that when employees can influence their wages by exerting effort, myopic utility maximization directly implies increasing and concave shaped wage profiles. Furthermore, employees get unhappier over time staying on a certain job although wages increase. Using data from 19 waves of the German Socio-Economic Panel we find empirical support for both the form of the utility function and the decreasing job satisfaction patterns.
Subjects: 
job satisfaction
wage increases
wage profiles
reference dependent utility
habit formation
loss aversion
JEL: 
M54
J28
J30
M12
Document Type: 
Working Paper

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