Abstract: This paper experimentally examines individuals’ work effort choices in response to wage changes. I designed a simple, real-effort experiment with four treatments. Subjects experience a wage increase in one treatment and a wage decrease in another treatment; the other two treatments are used as control treatments in comparison with the former two treatments. I find that subjects overreact to the wage increase but under-react to the wage decrease. Male subjects’ average effort is higher than female subjects. However, interestingly, the wage increase and the wage decrease both have a more pronounced effect on female subjects than their male counterparts. The results have important implications for research on the wage elasticities of labor supply.
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