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Preferences for wage frequency and implications for behavior

Work & Education India

Daily labor is ubiquitous in developing countries, and even when workers are hired for a prolonged period of times, wages are still paid on a daily basis and in cash. From the perspective of neoclassical economic theory with perfect markets, this feature has no implications for economic decision-making.). However, during a series of focus groups carried out in Lusaka, Zambia and Chennai, India during Summer 2018, we found a striking pattern: a substantial proportion of low-wage workers that we spoke to expressed a preference for receiving their wage payment weekly. In this project, we intend to ask whether people show non-monotonic preferences over wage frequency in an incentivized setting. We then ask whether wage frequency payment per se has a causal effect on important economics behaviors (such as savings and composition of consumption), and which markets failures these results hinge on.

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