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The daily grind: Cash needs and labor supply

Pascaline Dupas, Jonathan Robinson and Santiago Saavedra

Journal of Economic Behavior & Organization, 2020, vol. 177, issue C, 399-414

Abstract: The majority of people in developing countries are self-employed and can therefore set their own work hours. How do self-employed individuals motivate themselves to work hard day after day? We document four facts about the labor supply of Kenyan bicycle-taxi drivers: (1) drivers work more on days with higher cash needs; and (2) the quitting hazard increases once the driver earns enough to meet his day’s need; but (3) the needs are not binding subsistence requirements; and (4) randomized cash payouts have no meaningful effect on labor supply. These results are consistent with models in which workers have reference-dependent preferences over earning targets.

Keywords: Intertemporal labor supply; Reference-dependence; Income targeting, (search for similar items in EconPapers)
JEL-codes: C93 D12 J22 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:177:y:2020:i:c:p:399-414

DOI: 10.1016/j.jebo.2020.06.017

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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