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Limited Attention and Income Distribution


  • Abhijit V. Banerjee
  • Sendhil Mullainathan


Economists have long been interested in the idea that there is a direct circular relation between poverty and low productivity, and not just one that is mediated by market failures, usually in asset markets. The nutrition-based efficiency wage model (Partha Dasgupta and Debraj Ray, 1987) is the canonical example of models where this happens: However it has been variously suggested (see for example T. N. Srinivasan, 1994) that the link from nutrition to productivity and especially the link from productivity to nutrition is too weak to be any more than a small part of the story. Partha Dasgupta himself acknowledges this when he writes "nutrition-productivity construct provides a metaphor,..., for ... an economic environment harboring poverty traps" (Partha Dasgupta, 1997, page 5). We propose an alternative approach to this question based on the idea that attention is a scarce resource that is important for productivity. Specifically, people may not be able to fully attend to their jobs if they are also worrying about problems at home and being distracted in this way reduces productivity. But not paying attention at home is also costly: early symptoms of a child's sickness may go unnoticed; water may run out at the end of the day; kerosene for lighting lamps at home might run out and make it hard to do homework; etc. Finally, the extent to which home life distracts depends on the nature of home life. Specifically, certain goods (e.g. a good baby sitter, a 24-hour piped water supply, a connection to a power supply grid) can reduce the extent of home life distraction. These three assumptions generate an interesting relation between income and productivity that is at the core of our model. The non-poor in this model, by virtue of owning distraction-saving goods and services at home, are able to focus more on their work. Hence they will be more productive at work and will be able to afford more distraction-saving goods. This simple two-way relationship between in
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Suggested Citation

  • Abhijit V. Banerjee & Sendhil Mullainathan, 2008. "Limited Attention and Income Distribution," American Economic Review, American Economic Association, vol. 98(2), pages 489-493, May.
  • Handle: RePEc:aea:aecrev:v:98:y:2008:i:2:p:489-93
    Note: DOI: 10.1257/aer.98.2.489

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    References listed on IDEAS

    1. T. N. Srinivasan, 1994. "Destitution: A Discourse," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1842-1855, December.
    2. Dasgupta, Partha, 1997. "Nutritional status, the capacity for work, and poverty traps," Journal of Econometrics, Elsevier, vol. 77(1), pages 5-37, March.
    3. Abhijit V. Banerjee & Esther Duflo, 2008. "What Is Middle Class about the Middle Classes around the World?," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 3-28, Spring.
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    3. Avichai Snir & Daniel Levy & Alex Gotler & Haipeng (Allan) Chen, 2012. "Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity," Working Paper series 69_12, Rimini Centre for Economic Analysis.
    4. Abhijit Banerjee & Esther Duflo & Rachel Glennerster, 2011. "Is Decentralized Iron Fortification a Feasible Option to Fight Anemia Among the Poorest?," NBER Chapters,in: Explorations in the Economics of Aging, pages 317-344 National Bureau of Economic Research, Inc.
    5. Lange, Siri & Mwisongo, Aziza & Mæstad, Ottar, 2014. "Why don't clinicians adhere more consistently to guidelines for the Integrated Management of Childhood Illness (IMCI)?," Social Science & Medicine, Elsevier, vol. 104(C), pages 56-63.
    6. Hoffmann, Vivian E. & Moser, Christine M. & Herrman, Timothy, 2017. "Demand for aflatoxin-safe maize in Kenya: Dynamic response to price and advertising," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259133, Agricultural and Applied Economics Association.
    7. Andrew J. Oswald & Eugenio Proto & Daniel Sgroi, 2015. "Happiness and Productivity," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 789-822.
    8. Omer Moav and & Zvika Neeman, 2012. "Saving Rates and Poverty: The Role of Conspicuous Consumption and Human Capital," Economic Journal, Royal Economic Society, vol. 122(563), pages 933-956, September.
    9. Saugato Datta & Sendhil Mullainathan, 2014. "Behavioral Design: A New Approach to Development Policy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 7-35, March.
    10. Matthew Darling & Jaclyn Lefkowitz & Samia Amin & Irma Perez-Johnson & Greg Chojnacki & Mikia Manley, "undated". "Practitioner’s Playbook for Applying Behavioral Insights to Labor Programs," Mathematica Policy Research Reports e5d4ae723fa74caa878938a6b, Mathematica Policy Research.
    11. Rachel Cassidy, 2018. "Are the poor so present-biased?," IFS Working Papers W18/24, Institute for Fiscal Studies.
    12. repec:spr:empeco:v:55:y:2018:i:3:d:10.1007_s00181-017-1314-6 is not listed on IDEAS
    13. Terri Friedline, 2015. "A Developmental Perspective on Children's Economic Agency," Journal of Consumer Affairs, Wiley Blackwell, vol. 49(1), pages 39-68, March.
    14. Beaman, Lori & Magruder, Jeremy & Robinson, Jonathan, 2014. "Minding small change among small firms in Kenya," Journal of Development Economics, Elsevier, vol. 108(C), pages 69-86.
    15. Rachel Cassidy, 2018. "Are the poor so present-biased?," CSAE Working Paper Series 2018-19, Centre for the Study of African Economies, University of Oxford.
    16. repec:eee:jeborg:v:140:y:2017:i:c:p:246-266 is not listed on IDEAS
    17. Canidio, Andrea, 2015. "Focusing effect and the poverty trap," European Economic Review, Elsevier, vol. 76(C), pages 222-238.
    18. repec:eee:jeborg:v:150:y:2018:i:c:p:162-181 is not listed on IDEAS
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity


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