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Trial Title
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Wages and the Value of Time in Rural Labor Markets
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Valuing the Time of the Self-Employed
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Trial Status
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in_development
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on_going
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Abstract
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Before
The value of non-work time is a key parameter in many macroeconomic models and welfare impact estimates. In low-income countries, particularly in rural areas, concerns that labor market frictions prevent markets from clearing imply that a sizable wedge may exist between a worker's marginal value of non-work time (MVT) and her wage. We measure the marginal value of time, the reservation wage, and the market wage for a sample of farming households in Kenya by eliciting incentive-compatible bids for lottery tickets and offering casual day work. We distinguish between gaps arising from characteristics of the market for labor (e.g., labor rationing) and those arising from characteristics of labor suppliers (e.g., norms restrictions).
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After
People's value for their own time is a key input in public policy evaluations---these should account for time taken away from work or leisure as a result of policy. Using rich choice data collected from farming households in western Kenya, we show that households exhibit non-transitive preferences. As a result, neither market wages nor standard valuation techniques correctly measure participants' value of time. Using a structural model, we identify the behavioral wedges in participants' choices, and find that distortions appear when households exchange cash either for time or for goods. Our model estimates suggest that valuing the time of the self-employed at 60% of the market wage is a reasonable rule of thumb.
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Trial End Date
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June 23, 2019
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July 31, 2024
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JEL Code(s)
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Before
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C93, D03, D61, D91, J22, O12, Q12
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Last Published
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April 22, 2019 12:05 PM
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June 28, 2023 01:45 PM
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Intervention (Public)
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Before
We offer lottery tickets for an irrigation pump to farming households in both cash and hours of work. Bids are elicited through the Becker-DeGroot-Marschak method. We measure households' reservation wage by offering day work through the same method.
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After
This study is not a randomized trial, and there are no interventions. We use a lab-in-the-field design to elicit farmers' willingness to pay across several numeraires. We randomly assigned which numeraire farmers would pay in in order to adhere to our elicitation protocol (which told farmers that their payment would be randomly chosen), but our main analysis does not exploit this random variation.
Each farmer in our sample was given three choices that used the BDM design of Becker (1964), as implemented in Berry et al. (2020). Participants were asked to state their preferences for some object, for example a lottery ticket for a pump, in some unit of payment, for example, hours of labor. After stating their preferences, a random price was drawn, and if their stated value was higher than the price, that is what they paid for the object. If their value was lower than the price, no transaction occurred.
Choice RW (Reservation Wage): We explained to each farmer that we were offering one-time, 2-hour jobs performing casual agricultural labor in a different village. We asked each farmer whether they would be willing to accept the job at 120 KSh per hour. If they answered "no,'' we asked about their reservation wage directly. If they answered "yes,'' we asked whether they would accept the job at incrementally lower wages until they changed their answer to ``no.''
Choice CB (Cash Bid): We explained to each farmer that we were selling lottery tickets offering 1-in-10 odds of winning a MoneyMaker pump. We collected willingness to pay in cash by asking the farmer whether they would be willing to pay a low price of 20 KSh, and then asking the same question for increasingly higher prices, until the farmer declined the offer.
Choice TB (Time Bid): As in Choice CB, we explained to each farmer that we were offering lottery tickets with 1-in-10 odds of winning a MoneyMaker pump. We collected willingness to pay in time by asking the farmer whether they would be willing to work 30 minutes for the ticket, and then asking the same question for increasingly higher amounts of time, until the farmer declined the offer.
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Primary Outcomes (End Points)
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Before
Respondents' marginal value of time, reservation wage, and predicted market wage.
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Respondents' value of time, reservation wage, and predicted market wage.
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Primary Outcomes (Explanation)
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Before
Marginal value of time is measured as the ratio of the cash bid to the hours of work bid.
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We measure the value of time using three approaches. The first uses the respondent's choice in Choice RW directly (we call this the Direct Value of Time). The second uses the ratio of Choice CB to Choice TB (we call this the Indirect Value of Time). The third, the Structural Value of Time, is estimated structurally as described in the paper. Market wages are measured for casual laborers and predicted for those who did not recently perform casual labor.
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Experimental Design (Public)
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Before
We will locate 20-30 clusters of suitable farms (what we call "villages", with typically 12-25 suitable farms) with easy access to water. Within these villages we offer lottery tickets to a random sample of households. Bids are elicited in both cash and hours of work. We also offer day work to each household. Willingness to pay or work for the ticket, and reservation wage for the day work, are elicited through the Becker-DeGroot-Marschak method. Bid denomination (cash or hours of work)
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After
We selected 18 villages for our sample from a set of villages sampled for a separate project which auctioned off Kickstart irrigation pumps. We selected all control villages that had not received any pumps, and used remaining pumps from that project to elicit willingness to pay in cash and time.
Each village was randomly assigned (by a pseudo-random number generator) to one of three groups: Cash, Cash + Day Work, or Task. Farmers in Cash villages received a lottery ticket price payable in cash only, and were not eligible for wage work. Farmers in Cash + Day Work villages received a lottery ticket price payable in cash only, and were eligible for wage work. Farmers in Task villages received a lottery ticket price payable in hours of work only, and were not eligible for day work.
Our main analysis does not exploit this random variation.
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Randomization Unit
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Village to treatment arm, and individual to price.
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Village.
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Planned Number of Clusters
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20-30 villages
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18 villages
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Planned Number of Observations
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300-500 individuals
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332 farmers
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Sample size (or number of clusters) by treatment arms
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3 Treatment arms: 1) Cash payments, 2) Task payments, 3) Cash payments + day work
Exact sample sizes to be determined once some pilot data has been collected and power calculations can be done.
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Our study does not have treatment arms. We assigned which numeraire farmers would pay in as follows: 8 to Cash, 4 to Cash + Day Work, 6 to Task.
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Additional Keyword(s)
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value of time, non-transitivity, labor rationing, self-serving bias
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Keyword(s)
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Agriculture, Labor, Welfare
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Agriculture, Labor, Welfare
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Secondary Outcomes (End Points)
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Emotional responses of shame, anger, and pride relating to accepting and offering low wages.
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Emotional responses relating to accepting and offering low wages.
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Building on Existing Work
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Yes
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