Heather Schofield, assistant professor in the SC Johnson College of Business at Cornell University Habit Formation in Labor Supply With: Luisa Cefala, Supreet Kaur, Yogita Shamdasani We examine the possibility of habit formation in labor supply. Using a field experiment with casual urban laborers in India, we randomly provide treated workers with small financial incentives for attendance at labor stands for 7 weeks, leading to a 26% increase in labor supply. We then test for the persistence of impacts after the incentives are removed. First, we see a persistent 18% increase in labor supply over the following 2 months, resulting in a 10% increase in overall employment days. Second, treated workers exhibit a higher willingness to accept work contracts that are of longer duration and less flexible. Third, labor market disruptions deplete habit stock: shocks that temporarily pull workers out of the labor market instantly eliminate treatment effects on labor supply and work contract choice; in the absence of these shocks, we cannot reject that there is no decay in persistence over time. Fourth, we see no “fixed cost” changes in household time use, or learning among workers or employers- consistent with “true “state-dependence in labor supply. Rather, workers self-report an increase in automaticity- suggesting a change in their psychological default. Fifth, employers accurately predict treatment effects and are willing to pay to hire workers who have been treated with our habit stock intervention. Our results offer evidence for habit formation as a micro-foundation for state-dependence in labor supply and labor market hysteresis. They also suggest that in low income settings, intermittent employment and frequent shocks may inhibit workers from becoming habituated to regular work- with potential implications for absenteeism and barriers to structural transformation in developing countries.

Take 30 minutes to pause and reset with Let’s Meditate! Join Tanya Kingsley, LMSW, for a guided mindfulness meditation at Ives Hall! This beginner-friendly session is open to all. Let’s Meditate is a free, guided mindfulness meditation series, sponsored by Cornell Health in collaboration with numerous campus partners. Learn more at health.cornell.edu/meditate.

It’s the sweetest day of the year: ILR Cookie Day! Stop by the Catherwood Library to say hello to our library staff and connect with fellow students, faculty and staff. Come early because the cookies disappear fast! Vegan and gluten-free options will be available, and of course, there are lots of FREE BOOKS!