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Wage Satisfaction and Wage History: How the Present Shapes the Past

Author

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  • Alberto Prati

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract
Although satisfaction measures strongly depend on personal history, the relationship between memory and current well-being is still unclear. This article is dedicated to empirically investigating if current wage satisfaction affects the ability to date past wage changes. We match answers from a French national survey with administrative records, to compare the recalled and actual wage history. Our data support and extend some previous findings from the psychology literature: relatively remote events are recalled as closer in time, while relatively recent events are recalled as further in time. An instrumental variable strategy shows that these effects – respectively known as "forward" and "backward telescoping" – are partially caused by current satisfaction, so that, ceteris paribus, people who are satisfied with their wage tend to date wage cuts as more remote than they actually are. We suggest that this pattern of imperfect recall, which we denote as hedonic telescoping, opens a new perspective in the understanding of the well-known phenomenon of hedonic adaptation.

Suggested Citation

  • Alberto Prati, 2018. "Wage Satisfaction and Wage History: How the Present Shapes the Past," Working Papers halshs-01900520, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01900520
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01900520
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    Keywords

    recall bias; wage satisfaction; wage history; hedonic adaptation; hedonic telescoping;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

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