Linh T. Tô

Cash transfer payments are an increasingly widespread policy tool in developed and developing countries, used for both short-term objectives such as boosting consumer spending and long-term objectives such as poverty alleviation. This paper proposes that the marginal propensity to consume out of a windfall depends on a new state variable, the time horizon over which households anticipate receiving a payment. We test this in three different settings arising from a systematic survey of the literature: a natural experiment provided by the randomized disbursement dates of the 2008 U.S. fiscal stimulus payments, and randomized controlled trials on unconditional cash transfers in Kenya and Malawi. Our data show evidence of excess anticipation-dependence: Consumption consistently responds more strongly to the receipt of additional income after a shorter anticipation duration, in excess of what standard models predict. While households receiving stimulus payments do not increase spending in advance, the additional consumption expenditure in the month after receiving payment drops by about 30 percent for each additional week that a household waits for their payment. Savings data from Kenya and Malawi show comparable effects. We estimate a model that incorporates this novel form of history dependence to discuss implications for the design of fiscal stimulus policies and cash transfer programs. Our evidence and approach reconcile seemingly conflicting results that consumption responds to anticipated payments in some settings but not others.

This paper evaluates the hypothesis that, in setting wages, firms respond to costly signals by workers when such costs are informative of their values to the firms. For workers who become mothers, uncertainty about their future values can influence firms’ decisions to distribute career and promotion opportunities. Consequently, workers may forgo paid parental leave even when there is no human capital depreciation associated with taking leave. I build a signaling model with a continuous choice of leave period when such choice is restricted due to the maximum allowed paid leave duration. Using administrative data from Denmark and a parental leave policy extending the maximum allowed duration of parental leave, I show how a leave extension affects wages, hours, and promotion opportunities for workers whose signaling ability changes with the extension. In contrast to human capital theory, an individual can take longer leave but gain in wages when the larger choice set allows more workers to signal their type. The paper provides evidence of the labor market consequences of parental leave-taking due to signaling and the importance of asymmetric information in shaping parental leave choice.

We present a model of intertemporal choice based on anticipatory utility and examine the consequences of temptation goods, which decision-makers do not fully value prospectively. We discuss implications of the resulting time-inconsistent preferences for the decision making of the poor and show how the model gives rise to a poverty trap. We use data from randomized experiments on cash transfers in Kenya and Malawi to test one of the distinct empirical predictions of the model, that households with more time to anticipate receiving a lump-sum payment spend less on temptation goods, namely tobacco and alcohol.

This paper provides field evidence on how reference points adjust, a degree of freedom in reference-dependence models. Examining this in the context of cabdrivers’ daily labor-supply behavior, we ask how the within-day timing of earnings affects decisions. Drivers work less in response to higher accumulated income, with a strong effect for recent earnings that gradually diminishes for earlier earnings. We estimate a structural model in which drivers work towards a reference point that adjusts to deviations from expected earnings with a lag. This dynamic view of reference dependence reconciles conflicting “neoclassical” and “behavioral” interpretations of evidence on daily labor-supply decisions.

This paper studies the interplay between how much workers value workplace flexibility, whether they have such amenities, and how the presence of amenities affects their wages. To overcome the challenge of eliciting quantitative measures of willingness to pay (WTP) at the individual level, we propose the use of dynamic choice experiments, a method which we call the Bayesian Adaptive Choice Experiment (BACE). We implement this method to collect data on the joint distribution of wages, work arrangements, and WTP for different forms of flexibility. We then introduce and estimate a model in which workers may face different prices for job amenities depending on their productivity, extending the Rosen (1986) model of compensating differentials. The model captures key patterns in the data, including (i) the relationship between wages and having amenities, (ii) inequality in workplace amenities across the earnings distribution even when workers value these amenities similarly, and (iii) the tradeoffs across different forms of flexibility. We use the estimates to explore the welfare consequences of workers facing different amenity prices.