Elasticity of labor supply in rural Malawi: Evidence from a field experiment

Type Working Paper
Title Elasticity of labor supply in rural Malawi: Evidence from a field experiment
Author(s)
Publication (Day/Month/Year) 2010
URL http://www.iza.org/conference_files/worldb2010/goldberg_j5995.pdf
Abstract
I use panel data from a unique eld experiment to estimate the elasticity of working for a sample of adults who participate in the day labor market in rural Malawi. Once a week for 12 consecutive weeks, I make job offers to a pre-defined sample of 530 adults. This approach provides exogenous variation in wages, allows me to observe the full distribution of wage offers rather than the censored distribution of accepted wages, and permits the inclusion of time and village or time and individual fixed effects. I estimate that the elasticity of labor force participation is between 0.15 and 0.17, with no significant differences between men and women. I demonstrate that collapsing my data into a censored cross section that mimics the data used in the previous literature yields estimates of the intensive margin elasticity that are substantially higher than previous estimates developing countries. Further, I find that shocks to individuals' endowments lead to increased probability of working and less elastic supply, results consistent with the hypothesis that wage labor is an ex post coping strategy in developing countries.

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