Do Financial Concerns Make Workers Less Productive?

Research Question

The paper tests whether financial concerns distract workers sufficiently to meaningfully reduce their productivity, and whether receiving cash — by alleviating those concerns — can raise output even when total compensation is held fixed.

Setting and Sample

The experiment involves 408 low-income male agricultural casual laborers in rural Odisha, India, recruited from 47 villages across five worksites in four districts. The study takes place during the lean agricultural season (March–June 2017 and 2018), when formal employment is scarce (workers found paid wage work on only 1.9 days per week on average). During this period, 86% of workers reported being “worried” or “very worried” about their finances, 68–71% carried outstanding loans, and 64–66% said they would have difficulty coming up with Rs. 1,000 (roughly four days of wages) in an emergency. Workers bring these burdens to the job: on a given day, approximately one in two workers reported thinking about financial worries while working.

Sendhil Mullainathan | Macro Paper Warehouse

Do Financial Concerns Make Workers Less Productive?

Research Question

Setting and Sample