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Discussion Paper Details

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Title: Cardiovascular Consequences of Unfair Pay

Author(s): Armin Falk, Ingo Menrath, Johannes Siegrist and Pablo Emilio Verde

Publication Date: June 2011

Keyword(s): experiments, fairness, health, heart rate variability, inequality, social preferences and SOEP

Programme Area(s): Labour Economics

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.

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Bibliographic Reference

Falk, A, Menrath, I, Siegrist, J and Verde, P. 2011. 'Cardiovascular Consequences of Unfair Pay'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8463