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Discussion Paper Details

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Title: Cultural Diversity, Status Concerns and the Organization of Work

Author(s): Chaim Fershtman, Hans K Hvide and Yoram Weiss

Publication Date: July 2003

Keyword(s): aggregate output, diversity, status concerns and wage dispersion

Programme Area(s): Labour Economics

Abstract: A well-documented human tendency is to compare outcomes with others, trying to outperform them. These tendencies vary across cultures and among different individuals in a given society. The workplace is an important source for social interaction. The willingness of workers to exert effort depends on the private and social rewards that they receive in the form of wages and esteem. Workers may differ in the importance that they give to status ranking and the reference group to which they compare themselves. We explore the conditions under which, at equilibrium, firms would mix workers with different status concerns. We then discuss the effects of such cultural diversity on wages and show that, for equally productive workers, wages may vary, reflecting the different incentives that firms provide to workers with different social concerns. We show that, under plausible conditions, a more diverse workforce can increase the total output of the economy.

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Bibliographic Reference

Fershtman, C, Hvide, H and Weiss, Y. 2003. 'Cultural Diversity, Status Concerns and the Organization of Work'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3982