Daily Needs, Income Targets and Labor Supply: Evidence from Kenya

48 Pages Posted: 1 Aug 2013

See all articles by Pascaline Dupas

Pascaline Dupas

Stanford University

Jonathan Robinson

University of California, Santa Cruz

Date Written: August 2013

Abstract

Many studies suggest that daily income earners behave as if they have daily income targets. Less work has examined the determinants of the targets themselves. Using data on labor supply, shocks, and self-reported cash needs from 257 bicycle taxi drivers in Western Kenya, we provide evidence that many individuals treat their daily cash need as the day's target. We conjecture that in a physically demanding job, workers may have an incentive to quit early and so set a personal rule of "earning enough for the day's need" as an internal commitment device to provide effort. This heuristic is more common among less educated workers and has substantial welfare costs: greater variance in hours worked is associated with worse health, and we estimate that workers would earn 5% more by working a set number of hours each day (more if their wage elasticity were positive).

Suggested Citation

Dupas, Pascaline and Robinson, Jonathan, Daily Needs, Income Targets and Labor Supply: Evidence from Kenya (August 2013). NBER Working Paper No. w19264. Available at SSRN: https://ssrn.com/abstract=2304691

Pascaline Dupas (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Jonathan Robinson

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

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