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Labor Supply under Temporary Wage Increases: Evidence from a Randomized Field Experiment

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  • Mats Ekman
  • Niklas Jakobsson
  • Andreas Kotsadam

Abstract

We conduct a pre-registered randomized controlled trial to test for income targeting in labor supply decisions among sellers of a Swedish street paper. These workers face liquidity constraints, high income volatility, and discretion over hours. Treated individuals received a 25 percent bonus per copy sold for the duration of an issue, simulating an increase in earnings potential. Treated sellers sold more papers, worked longer hours, and took fewer days off. These findings contrast with studies on intertemporal labor supply that find small substitution effects. Notably, when we apply strategies similar to observational studies, we recover patterns consistent with income targeting.

Suggested Citation

  • Mats Ekman & Niklas Jakobsson & Andreas Kotsadam, 2026. "Labor Supply under Temporary Wage Increases: Evidence from a Randomized Field Experiment," Papers 2602.11992, arXiv.org.
    • Handle: RePEc:arx:papers:2602.11992
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    References listed on IDEAS

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    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
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