Do Financial Concerns Make Workers Less Productive?

Article dans une revue: Workers who are worried about their personal finances may find it hard to focus at work. If so, reducing financial concerns could 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 std. dev.), 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.

Auteur(s)

Supreet Kaur, Sendhil Mullainathan, Suanna Oh, Frank Schilbach

Revue
  • Quarterly Journal of Economics
Date de publication
  • 2025
Mots-clés JEL
D9 D91 I32 J24 O12
Mots-clés
  • Financial strain
  • Financial worries
  • Psychology of poverty
  • Attention
Pages
  • 635-689
Version
  • 1
Volume
  • 140