The Effect of Relative Wage Per Hour on Labor Supply

This paper explores how ones labor supply is affected by their relative wage as compared to people in the same geographical region as them. The study finds the predicted negative relationship between relative wage per hour and hours of work. The paper expands on prior literature because it uses a different data set and examines it through different reference groups (the group in which a person compares themselves to). This finding is important because it may be beneficial for the government to understand people’s labor supply choices when making policies that deal with labor supply. Furthermore, it would be helpful to understand more how people respond to their environment differently