Working Paper: CEPR ID: DP8463
Authors: Armin Falk; Ingo Menrath; Johannes Siegrist; Pablo Emilio Verde
Abstract: This paper investigates physiological responses to perceptions of unfair pay. In a simple principal agent experiment agents produce revenue by working on a tedious task. Principals decide how this revenue is allocated between themselves and their agents. In this environment unfairness can arise if an agent's reward expectation is not met. Throughout the experiment we record agents' heart rate variability. The latter is an indicator of stress-related impaired cardiac autonomic control, which has been shown to predict coronary heart diseases in the long run. Establishing a causal link between unfair pay and heart rate variability therefore uncovers a mechanism of how perceptions of unfairness can adversely affect cardiovascular health. We further test potential adverse health effects of unfair pay using data from a large representative data set. Complementary to our experimental findings we find a strong and highly significant association between health outcomes, in particular cardiovascular health, and fairness of pay.
Keywords: experiments; fairness; health; heart rate variability; inequality; social preferences; SOEP
JEL Codes: C91; D03; D63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower HRV (C58) | higher perceived unfairness (D63) |
| perceived unfair pay (J31) | subjective health status (I14) |
| unfair pay (J33) | heart rate variability (HRV) (C58) |
| perceived unfairness (D63) | heart rate variability (HRV) (C58) |
| actual share received (D33) | perceived unfairness (D63) |
| discrepancy between expectations and actual share (D84) | perceived unfairness (D63) |