Kwacha Gonna Do? Experimental Evidence about Labor Supply in Rural Malawi

I use a field experiment to estimate the wage elasticity of employment in the day labor market in rural Malawi. Once a week for 12 consecutive weeks, I make job offers for a workfare-type program to 529 adults. The daily wage varies from the tenth to the ninetieth percentile of the wage distribution, and individuals are entitled to work a maximum of one day per week. In this context (the low agricultural season), 74 percent of individuals worked at the lowest wage, and consequently the estimated labor supply elasticity is low (0.15), regardless of observable characteristics. (JEL C93, J22, J31, O15, O18, R23)

[1]  L. Iyer.  Direct versus Indirect Colonial Rule in India: Long-Term Consequences , 2010, The Review of Economics and Statistics.

[2]  John C. Ham.  Testing whether Unemployment Represents Intertemporal Labour Supply Behaviour , 1986 .

[3]  R. Thaler,et al.  Labor Supply of New York City Cabdrivers: One Day at a Time , 1997 .

[4]  Rema Hanna,et al.  Ordeal Mechanisms in Targeting: Theory and Evidence from a Field Experiment in Indonesia , 2013 .

[5]  Bruce D. Meyer.  Labor Supply at the Extensive and Intensive Margins: The EITC, Welfare, and Hours Worked , 2002 .

[6]  Kirk Doran,et al.  A Shred of Credible Evidence on the Long-Run Elasticity of Labour Supply , 2010 .

[7]  T. Barmby,et al.  What Lies Beneath ?: Effort and Incentives on Archaeological digs in the 1930's , 2009 .

[8]  M. Rosenzweig.  Rural Wages, Labor Supply, and Land Reform: A Theoretical and Empirical Analysis , 1978 .

[9]  A. Orr,et al.  Exploring Seasonal Poverty Traps: The ‘Six-Week Window’ in Southern Malawi , 2009 .

[10]  N. Stern.  On the specification of labour supply functions , 1986 .

[11]  W. Wiseman.  Overview of Public Works Programmes in Sub-Saharan Africa , 2009 .

[12]  A. Kochar.  Smoothing Consumption by Smoothing Income: Hours-of-Work Responses to Idiosyncratic Agricultural Shocks in Rural India , 1999, Review of Economics and Statistics.

[13]  J. Hausman,et al.  The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiment , 1978, Journal of Political Economy.

[14]  Joshua D. Angrist,et al.  Mostly Harmless Econometrics: An Empiricist's Companion , 2008 .

[15]  K. Beegle,et al.  World development report 2013 : jobs , 2012 .

[16]  P. Dupas,et al.  Free Distribution or Cost-Sharing? Evidence from a Randomized Malaria Prevention Experiment , 2007 .

[17]  Henry S. Farber,et al.  Is Tomorrow Another Day? The Labor Supply of New York Cab Drivers , 2003 .

[18]  Gerald S. Oettinger,et al.  An Empirical Analysis of the Daily Labor Supply of Stadium Vendors , 1999, Journal of Political Economy.

[19]  Elaina Rose.  Ex Ante and Ex Post Labor Supply Response to Risk in a Low-Income Area * , 2001 .

[20]  Banco Mundial.  World development report 2013: jobs , 2013 .

[21]  W. Lewis.  Economic Development with Unlimited Supplies of Labour , 1954 .

[22]  Frederico Finan,et al.  Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service , 2012, SSRN Electronic Journal.

[23]  Stephen Coate,et al.  WORKFARE VS. WELFARE: INCENTIVE ARGUMENTS FOR WORK REQUIREMENTS IN POVERTY ALLEVIATION PROGRAMS , 1989 .

[24]  Yuan K. Chou,et al.  TESTING ALTERNATIVE MODELS OF LABOUR SUPPLY: EVIDENCE FROM TAXI DRIVERS IN SINGAPORE , 2002 .

[25]  J. Heckman.  What Has Been Learned about Labor Supply in the Past Twenty Years , 1993 .

[26]  John C. Ham,et al.  Testing Intertemporal Substitution, Implicit Contracts, and Hours Restriction Models of the Labor Market Using Micro Data , 2002 .

[27]  R Fisher,et al.  Design of Experiments , 1936 .

[28]  Raj Chetty,et al.  A New Method of Estimating Risk Aversion , 2003 .

[29]  A. Abdulai,et al.  Determinants of Nonfarm Earnings of Farm‐Based Husbands and Wives in Northern Ghana , 1999 .

[30]  T. Shakespeare,et al.  Observational Studies , 2003 .

[31]  Henry S. Farber,et al.  Is Tomorrow Another Day? The Labor Supply of New York City Cabdrivers , 2005, Journal of Political Economy.

[32]  Pranab Bardhan,et al.  Labor Supply Functions in a Poor Agrarian Economy , 1979 .

[33]  E. Fehr,et al.  Do Workers Work More If Wages are High? Evidence from a Randomized Field Experiment , 2005 .