Effort Momentum

This paper examines how past effort can impact current effort, such as when effort is reduced following an interruption. I study incentivized real-effort experiments in which both piece rates and leisure options were manipulated and find effort displays significant stickiness, even in the absence of switching costs. I demonstrate that this intertemporal evidence is indicative of effort “momentum”, rather than on-the-job learning, reciprocity, or income targeting. When employing an instrumental variables (IV) approach, approximately 50 % of the effort increase persists for 5 minutes after incentives return to baseline. Thus if a worker suffers a complete interruption in productivity, it would take an average of 15 minutes to return to 90 % of prior work effort. While there are serious caveats with extrapolation, these findings indicate that productivity loss due to effort momentum alone costs the US economy as much as $200 billion annually. I further demonstrate that advanced knowledge does not significantly reduce this productivity loss. This finding of effort momentum is especially important for potential labor economics studies that intend to employ individual fixed effects