The authors use a labor supply; relative pay; experimental economics laboratory experiment to examine the impact of relative wages on labor supply. They test the hypothesis that, ceteris paribus, making a given wage high (low) relative to other wage levels will lead to an increase (decrease) in labor supply. They find that labor supply does respond significantly to relative pay, and in the expected direction. However, when a strong enough reason is given for the relative low pay, this difference disappears.
Keywords: labor supply; relative pay; experimental economics
JEL Classifications: J22, J31, D03