High absenteeism and excess labor supply often coexist in labor markets across developing countries, creating significant challenges for both firms and workers. In this paper, we show that workers frequently experience unpredictable disruptions to their daily labor supply, hindering their ability to work regularly. Using an incentivized-choice experiment with 605 participants, we find that individuals are willing to forgo 8% of total potential earnings for day-to-day flexibility – specifically the ability to take time off without advance planning or notice. Randomly offering day-to-day flexibility leads to a 47% increase in contract compliance and a 13% increase in total earnings. Next, we document that demands from individuals’ social networks are substantial and contribute to labor supply disruptions. Consistent with this mechanism, demand for day-to-day flexibility is significantly higher when caste-based network demands are more likely to bind. Our findings provide new insight into how worker demand for flexibility shapes labor supply in developing countries.

Worker absenteeism is widely cited as a major impediment for private sector growth in developing countries, but systematic evidence on the extent of absenteeism and its implications remains scarce. Using a nationally representative panel of Indian manufacturing firms, we document novel empirical facts about the prevalence and impact of absenteeism. High absenteeism rates are associated with smaller firm size and higher wages, with effects particularly pronounced in sectors with strong co-worker complementarities. Our in-depth survey with 206 firms in Odisha shows that firms use costly strategies to cope with absenteeism, such as hiring slack labor and rotating workers across tasks. To understand the macroeconomic implications of our findings, we embed absenteeism risk into a model of firm dynamics with hiring frictions, wage bargaining, and firm entry/exit. The model rationalizes the empirical patterns and shows that absenteeism amplifies labor misallocation and substantially reduces aggregate productivity.

Accurately measuring preferences and beliefs in surveys is crucial for social science research, but standard monetary incentives cannot be used when responses cannot be verified. We study two psychological mechanisms for improving answer quality that can be applied to unverifiable questions: (i) an unexpected bonus payment designed to trigger reciprocity towards the researcher, and (ii) telling respondents that they will later be paid to accurately restate their previously-given answers, which could motivate careful initial answers that are naturally easier to reconstruct. In a large online experiment (N=2,428), the bonus method improves both answer correctness and consistency, and does so more effectively than dropping participants who fail an attention check. This effect is driven by increased effort and reciprocity. The restatement method, however, does not consistently improve answer quality, primarily because participants exert effort trying to memorize their answers instead of answering carefully. These results demonstrate the potential and limitations of using psychological mechanisms to improve the quality of survey responses.

Workers who are worried about their personal finances may find it hard to focus at work. If so, reducing financial concerns could by itself increase productivity. We test this hypothesis in a sample of low-income Indian piece-rate manufacturing workers. We stagger when wages are paid out: some workers are paid earlier and receive a cash infusion while others remain liquidity constrained. The cash infusion leads workers to reduce their financial concerns by immediately paying off debts and buying household essentials. Subsequently, they become more productive at work: their output increases by 7% (0.11 SD), and they make fewer costly, unintentional mistakes. Workers with more cash-on-hand thus not only work faster but also more attentively, suggesting improved cognition. These effects are concentrated among more financially constrained workers. We argue that mechanisms such as gift exchange or nutrition cannot account for our results. Instead, our findings suggest that financial strain, at least partly through psychological channels, has the potential to reduce earnings exactly when money is most needed.

How does identity influence economic behavior in the labor market? I investigate this question in rural India, focusing on the effect of caste identity on job-specific labor supply. In a field experiment, laborers choose whether to take up various job offers, which differ in associations with specific castes. Workers are less willing to accept offers that are linked to castes other than their own, especially when those castes rank lower in the social hierarchy. Workers forego large payments to avoid job offers that conflict with their caste identity, even when these decisions are made in private.