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

  • Pascaline Dupas
  • Jonathan Robinson

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).

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19264.

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Date of creation: Aug 2013
Date of revision:
Handle: RePEc:nbr:nberwo:19264
Note: DEV LS
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