Research Papar
Importance of Money
1
RUNNING HEAD: Importance of Money
The Effect of Income on the Importance of Money: Survey and Experimental Evidence*
Sanford E. DeVoe Rotman School of Management University of Toronto Jeffrey Pfeffer Graduate School of Business Stanford University Byron Y. Lee Renmin University of China Beijing, China
*To be published in Industrial and Labor Relations Review.
KEYWORDS: judgement and decision making; money; income, experiments.
Importance of Money
2
Abstract The authors investigate how both the amount and source of income affects the importance placed on money using a longitudinal analysis of the British Household Panel Survey and evidence from two laboratory experiments. Larger amounts of money received for labor were associated with individuals placing greater importance on money, but this effect did not hold for money unrelated to work. The longitudinal survey analysis demonstrated these differential effects of the source of income on money’s importance while holding constant stable individual differences. The experiments provide evidence that the source of income has a causal effect on the importance of money as well as on the effort expended to earn more money. Even as individual differences in the importance placed on money may affect peoples’ income, our results suggests that, depending upon its source, income can also affect the importance people place on money.
Importance of Money
3
The Effect of Income on the Importance of Money: Survey and Experimental Evidence
The strange part is, the more I made, the more I got preoccupied with money. When suddenly I didn’t have to think about money as much, I found myself starting to think increasingly about it. Money corrupts the mind. –Daniel Vasella, CEO of Novartis (quoted by Leaf, 2002, p. 109)
The importance people place on money affects numerous aspects of work and labor. Choices among jobs that vary on multiple dimensions depend on the relative
1
RUNNING HEAD: Importance of Money
The Effect of Income on the Importance of Money: Survey and Experimental Evidence*
Sanford E. DeVoe Rotman School of Management University of Toronto Jeffrey Pfeffer Graduate School of Business Stanford University Byron Y. Lee Renmin University of China Beijing, China
*To be published in Industrial and Labor Relations Review.
KEYWORDS: judgement and decision making; money; income, experiments.
Importance of Money
2
Abstract The authors investigate how both the amount and source of income affects the importance placed on money using a longitudinal analysis of the British Household Panel Survey and evidence from two laboratory experiments. Larger amounts of money received for labor were associated with individuals placing greater importance on money, but this effect did not hold for money unrelated to work. The longitudinal survey analysis demonstrated these differential effects of the source of income on money’s importance while holding constant stable individual differences. The experiments provide evidence that the source of income has a causal effect on the importance of money as well as on the effort expended to earn more money. Even as individual differences in the importance placed on money may affect peoples’ income, our results suggests that, depending upon its source, income can also affect the importance people place on money.
Importance of Money
3
The Effect of Income on the Importance of Money: Survey and Experimental Evidence
The strange part is, the more I made, the more I got preoccupied with money. When suddenly I didn’t have to think about money as much, I found myself starting to think increasingly about it. Money corrupts the mind. –Daniel Vasella, CEO of Novartis (quoted by Leaf, 2002, p. 109)
The importance people place on money affects numerous aspects of work and labor. Choices among jobs that vary on multiple dimensions depend on the relative
References: 4: 193-185. Thaler, Richard H. 1999. Mental accounting matters. Journal of Behavioral Decision Making, 12: 183-206. Thaler, Richard H., and Shefrin, Hersh M. 1981. An economic theory of self-control. Journal of Political Economy, 89: 392-406. Table 1. Fixed-Effects Regression Predicting the Importance of Money in Study 1. Summary Statistics 6.45 (1.84) £10.07 (9.61) £480.74 (3279.38) £40,605 (66,319) 9.06 (1.65) 62% (0.49) 2.99 (1.24) Model I Model II Importance of Money