Essays on Worker Productivity and Labor Supply

This thesis is a collection of essays exploring factors that affect developing country workers’ productivity, well-being and labor supply. The first essay explores how workers labor supply is affected by transitory income shocks. In neoclassical models, transitory income shocks should not affect labor supply. This prediction has often been rejected empirically in favor of theories featuring reference-dependent preferences. We show that apparent negative daily income effects can be generated in a dynamic neoclassical model of labor supply by dynamic selection, where income early in the day causes differential attrition throughout workers’ shifts. Using data from an RCT with rich experimental variation in income and fine measures of labor supply, we show that estimates of negative income effects are an artifact of dynamic selection in this setting, providing a neoclassical explanation to the findings of the income targeting literature. The second essay seeks to answer how alleviating sleep deprivation among poor urban workers affect work outcomes, well being, and decision making. The urban poor in developing countries face challenging living environments, which may interfere with good sleep. Using actigraphy to measure sleep objectively, we find that low-income adults in Chennai, India sleep only 5.5 hours per night on average despite spending 8 hours in bed. Their sleep is highly interrupted, with sleep efficiency—sleep per time in bed—comparable to those with disorders such as sleep apnea or insomnia. A randomized three-week treatment providing information, encouragement, and improvements to home sleep environments increased sleep duration by 27 minutes per night by inducing more time in bed. Contrary to expert predictions and a large body of sleep research, increased nighttime sleep had no detectable effects on cognition, productivity, decision-making, or well-being, and led to small decreases in labor supply. In contrast, short afternoon naps at the workplace improved an overall index of outcomes by 0.12 standard deviations, with significant increases in productivity, psychological well-being, and cognition, but a decrease in work time. The third essay explores the effect of optimally assigning workers to teams and to tasks on their productivity. Governments regularly assign bureaucrats to teams and tasks, yet rarely with the explicit goal of boosting public sector productivity. This paper asks whether a low-capacity government can increase tax revenue by optimally assigning tax collectors to teams and these teams to households. We study these questions in the context of a property tax campaign in the DRC, where randomly formed teams of tax collectors were randomly assigned to work in different neighborhoods. Due to complementarities in collectors’ ability, the optimal assignment policy consists in assigning high-ability collectors to each other and assigning high-ability teams of collectors to households with high payment propensity. This optimal assignment policy would result in a 36% increase in tax compliance. In contrast, the government would have to replace 62% of low-ability collectors with high-ability ones to achieve a similar increase in compliance. We provide suggestive evidence that the complementarity between high-ability collectors is explained by skill transmission between collectors rather than peer pressure (or motivation) to increase effort. JEL Codes: D9, J2, O1Ph.D