The Response of Workers to Wages in Tournaments

Abstract

The authors examine labor supply using 1,426 responses of individual runners to prizes in open invitational foot races. The data are used to decompose the overall market response of higher prizes into two components based on the basic tournament model. First, an entry effect exists in which higher wages attract more highly skilled runners to participate. Second, the spread between prizes incites runners individually to work harder. This second effect is detected across the entire sample and for individuals measured against their own average performance. The authors also examine the supply elasticities between the sexes. As a group, women respond more to higher wages than men in both the entry and individual effort dimensions. Also, the more concentrated the prize money in a race, the higher the revealed effort level by the runners. The authors find that the tournament nature of competition has important incentive effects.