The Economics of Tipping
Journal of Economic Perspectives
vol. 34,
no. 2, Spring 2020
(pp. 215-36)
(Complimentary)
Abstract
Tipping involves dozens of billions of dollars annually in the US alone and is a major income source for millions of workers. But beyond its economic importance and various economic implications, tipping is also a unique economic phenomenon in that people pay tips voluntarily without any legal obligation. Tipping demonstrates that psychological and social motivations can be a substantial reason for economic behavior, and that economic models should go beyond a selfish economic agent who has no feelings in order to capture the full range of economic activities. This article discusses some aspects of tipping, with an emphasis on economic issues: the history of tipping, the main reasons for tipping, why tipping could be a welfare-increasing and sustainable social norm, the relationship between tipping and service quality, how tipping represents a struggle over rents, and issues of discrimination and sexual harassment related to tipping.Citation
Azar, Ofer H. 2020. "The Economics of Tipping." Journal of Economic Perspectives, 34 (2): 215-36. DOI: 10.1257/jep.34.2.215Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- J16 Economics of Gender; Non-labor Discrimination
- J31 Wage Level and Structure; Wage Differentials
- J71 Labor Discrimination
- L83 Sports; Gambling; Restaurants; Recreation; Tourism
- Z13 Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
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