Essays in Behavioral Development Economics

This dissertation analyzes how cultural and behavioral frictions affect decision-making in labor markets of developing economies. It studies factors that have received relatively little attention in economics—namely concerns about preserving identity, cognitive strain from financial stress, and gender norms—and examines their impacts on labor supply and productivity. Field experiments in the state of Odisha, India are used to provide direct empirical evidence on these relationships. Chapter 1 investigates how identity—one's concept of self—influences economic behavior in the labor market, focusing on the effect of caste identity on labor supply. In the experiment, casual laborers belonging to different castes choose whether to take up various real job offers. All offers involve working on a default manufacturing task and an additional task. The additional task changes across offers, is performed in private, and differs in its association with specific castes. Workers' average take-up rate of offers is 23 percentage points lower if offers involve working on tasks that are associated with castes other than their own. This gap increases to 47 pp if the castes associated with the relevant offers rank lower than workers' own in the caste hierarchy. Responses to job offers are invariant to whether or not workers' choices are publicized, suggesting that the role of identity itself—rather than social image—is paramount. Using a supplementary experiment, I show that 43% of workers refuse to spend ten minutes working on tasks associated with other castes, even when offered ten times their daily wage. Results indicate that identity may be an important constraint on labor supply, contributing to misallocation of talent in the economy. Chapter 2—joint work with Supreet Kaur, Sendhil Mullainathan, and Frank Schilbach—tests for a direct causal impact of financial strain on worker productivity. The experiment randomly varies timing of income receipt among laborers who earn piece rates for manufacturing tasks: some workers receive their wages on earlier dates, altering when cash constraints are eased while holding overall wealth constant. Workers increase productivity by 5.3% on average in the days after cash receipt. The impacts are concentrated among poorer workers in the sample, who increase output by over 10%. This effect of cash on hand on productivity is not explained by mechanisms such as gift exchange, trust in the employer, or nutrition. The chapter also presents positive evidence that productivity increases are mediated through lower attentional errors in production, indicating a role for improved cognition after cash receipt. Finally, directing workers’ attention to their finances via a salience intervention produced mixed results—consistent with concerns about priming highlighted in the literature. Results indicate a direct relationship between financial constraints and worker productivity and suggest that psychological channels mediated through attention play a role in this relationship. Chapter 3 examines whether gender norms lead women to hold back their potential in the labor market. While the existing literature has shown that women tend to earn less than their husbands, there is limited direct evidence on whether women actively avoid earning more than their spouses and the determinants of such behavior. The experiment engages married couples working as casual laborers in a short-term manufacturing job that pays piece-rate on output. The experiment provides women an extra hour to work without this difference being salient, making it likely that they could earn more than their husbands. After husbands finish piece-rate production, women are randomized into one of three conditions in which 1) the wife is informed of her husband’s production and expects both spouses to learn how much each spouse has produced, 2) the wife is informed of her husband’s production and expects that only she will learn how much each spouse has produced, or 3) both spouses are only informed of their joint total production. Results show that women in the last two conditions achieve on average one hour’s worth of production more than that of their husbands, suggesting that women do not face intrinsic concerns about earning more than their husbands. However, this productivity gap substantially decreases when husbands are expected to learn about individual production. This finding suggests that norms in marriage may be an important factor contributing to gender inequality in the labor market.

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