Principal Investigators:
- Prof. Supreet Kaur
- Luisa Cefala Ph.D
- Prof. Yogita Shamdasani
- Prof. Heather Schofield
Location: Chennai
Time-line: 2019 - 2021
About:
Labor turnover and low labor supply is a major impediment to productivity in poor countries. While research focused on this policy concern has typically studied the role of labor demand, in this study we explore the role of limited labor supply in this market. We hypothesize that workers--who are used to the irregular, flexible, and intermittent work schedules associated with agriculture and casual work--have difficulty providing regular labor supply in the formal sector because they lack the habit of doing so.
To study labor supply, we focus on casual daily laborers in India who often gather in “labor stands” -- public spaces where employers also congregate to find workers. Attendance at the stand provides a clear measure of labor supply. We will test whether temporary financial incentives to attend the stand can generate a habit of more regular labor supply, leading to greater attendance even after incentives are removed. However, persistence in this behavior change could not only be driven by habit formation, but also increased demand for --now more reliable-- labor. Additional experimental activities will be conducted to parse whether changes in labor supply are driven by: (i) supply side adjustments (i.e. habit formation), (ii) demand increases responding to the more regular labor supply (e.g. improved matching, development of firm-specific human capital), or (iii) both -- creating a virtuous cycle.
This study will contribute to the academic literatures on habit formation, industrialization, and drivers of labor productivity in a common and high-impact environment. Further, the research will contribute directly to active policy debates about employment in low-income countries. Should the study prove successful, such programs could have a very favorable cost benefit ratio given the long-run persistence of the behavior changes and temporary nature of the incentives.
Research Design:
This RCT will enroll casual laborers at spot labor markets for construction work to test whether temporary financial incentives can help workers develop the habit of regular labor supply. Treated workers are provided incentives with the goal of boosting their labor supply in urban labor stands -- their primary source of regular employment -- over a two-month period. Control participants will receive matched (but unconditional) payments to equalize the income effects of the treatments. We examine the persistence of effects on labor supply by continuing to track labor supply and earnings daily for an additional 2 months after incentives are removed. This study is executed in three phases: Baseline, Phase 1 and Phase 2. The baseline collects data on demographics, time use, and social networks, this period has no intervention. Post baseline, participants enter Phase 1 and are assigned to a Treatment group -- receiving incentives to increase their labor supply -- or a Control group -- receiving matched but unconditional payments. During Phase 2, payments will be removed, but workers will continue to be surveyed about their labor market outcomes. Throughout the entire study, all participants receive small payments immediately for taking a short daily survey. Individuals not observed at the stand will be surveyed by phone.
Grant Partners:
- The Trustees of the University of Pennsylvania - View Website
- The University of California, Berkeley - View Website
- Weiss Family Fund for Research in Development Economics - View Website