Working Paper: CEPR ID: DP17017
Authors: Daniel Agness; Travis Baseler; Sylvain Chassang; Pascaline Dupas; Erik Snowberg
Abstract: People’s value for their own time is a key input in evaluating public policies: evaluations 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 consistent with behavioral features such as loss aversion and self-serving bias. As a result, neither market wages nor standard valuation techniques (such as the Becker-DeGroot-Marschak—BDM—mechanism of Becker et al., 1964) correctly measure participants’ value of time. Using a structural model, we identify the mix of behavioral features driving our choice data. We find that these features distort choices when exchanging 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.
Keywords: nontransitivity; labor rationing; loss aversion; self-serving bias
JEL Codes: C93; D01; D91; J22; O12; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| traditional valuation methods (C52) | inaccurate reflection of the value of time for self-employed individuals (J29) |
| loss aversion and self-serving bias (G41) | non-transitive preferences (D11) |
| non-transitive preferences (D11) | underestimation of the value of time when measured indirectly (J17) |
| average value of time (C41) | 60% of the market wage (J31) |
| behavioral biases (D91) | systematic undervaluation of time in evaluations of labor-saving technologies (J29) |
| undervaluation of self-employed time (J29) | misinterpretations of the profitability of technologies and interventions that save time (O33) |
| undervaluation of self-employed time (J29) | under-adoption of labor-saving technologies in low-income contexts (J46) |