Pay, Reference Points, and Police Performance

Alexandre Mas

NBER Working Paper No. 12202
Issued in May 2006
NBER Program(s):Labor Studies

Several theories suggest that pay raises below a reference point will reduce job performance. Final offer arbitration for police unions provides a unique opportunity to examine these theories, as the police officers either receive their requested wage or receive a lower one. In the months after New Jersey police officers lose in arbitration, arrest rates and average sentence length decline and crime reports rise relative to when they win. These declines are larger when the awarded wage is further from the police union's demand. The findings support the idea that considerations of fairness, disappointment, and, more generally, reference points affect workplace behavior.

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Acknowledgments

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Document Object Identifier (DOI): 10.3386/w12202

Published: Mas, Alexandre. "Pay, Reference Points, And Police Performance," Quarterly Journal of Economics, 2006, v121(3,Aug), 783-821. citation courtesy of

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