Does Poverty Change Labor Supply? Evidence from Multiple Income Effects and 115,579 Bags

Banerjee, Abhijit V.; Karlan, Dean S.; Trachtman, Hannah; Udry, Christopher

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Does Poverty Change Labor Supply? Evidence from Multiple Income Effects and 115,579 Bags

CEPR Discussion Paper No. DP14812

41 Pages Posted: 28 May 2020 Last revised: 9 Nov 2021

See all articles by Abhijit V. Banerjee

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

Yale University; Northwestern University - Kellogg School of Management; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Hannah Trachtman

Yale University

Christopher Udry

Northwestern University

There are 3 versions of this paper

Date Written: May 2020

Abstract

exogenous changes in income using data from a randomized evaluation of a multi-faceted grant program in northern Ghana combined with a bagmaking operation that we implemented. We find strong evidence of a positive "income effect" on labor supply. We argue that simple models with either labor or capital market frictions cannot explain the results, whereas a model that allows for positive physiological or psychological productivity effects from higher income fits with our findings.

Keywords: income elasticity, Labor Supply, poverty

JEL Classification: H31, J22, O12

Suggested Citation: Suggested Citation

Banerjee, Abhijit V. and Karlan, Dean S. and Karlan, Dean S. and Trachtman, Hannah and Udry, Christopher, Does Poverty Change Labor Supply? Evidence from Multiple Income Effects and 115,579 Bags (May 2020). CEPR Discussion Paper No. DP14812, Available at SSRN: https://ssrn.com/abstract=3612883

Abhijit V. Banerjee (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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617-253-8855 (Phone)
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Dean S. Karlan

Yale University ( email )

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New Haven, CT 06520-8269
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Northwestern University - Kellogg School of Management ( email )

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Innovations for Poverty Action ( email )

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Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL) ( email )

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United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

Hannah Trachtman

Yale University

Christopher Udry

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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Does Poverty Change Labor Supply? Evidence from Multiple Income Effects and 115,579 Bags