Author(s)  
Armin Falk, Fabian Kosse, Ingo Menrath, Pablo Emilio Verde, Johannes Siegrist

This paper investigates physiological responses to perceptions of unfair pay. We use an integrated approach exploiting complementarities between controlled lab and representative panel data. 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. Throughout the experiment we record agents’ heart rate variability, which is an indicator of stress-related impaired cardiac autonomic control, and which has been shown to predict coronary heart disease in the long-run. Our findings establish a link between unfair payment and heart rate variability. Building on these findings, we further test for potential adverse health effects of unfair pay using observational data from a large representative panel data set. Complementary to our experimental findings we show a strong and significant negative association between unfair pay and health outcomes, in particular cardiovascular health.

JEL Codes  
C91: Design of Experiments: Laboratory; Individual
D03: Behavioral Economics: Underlying Principles
D63: Equity; Justice; Inequality; and Other Normative Criteria and Measurement
I14: Health and Inequality
Keywords  
fairness
social preferences
inequality
heart rate variability
health
experiment
SOEP