Linh T. Tô

Cash transfer payments are an increasingly widespread policy tool in developed and developing countries, used for both short-term and long-term objectives. We study the design of these policies by examining how the time horizon over which households anticipate receiving transfer payments affects consumption and savings. Using Nielsen Consumer Panel data, we estimate higher marginal propensities to spend for US households scheduled to receive the 2008 Economic Stimulus Payments sooner. Analyzing data from randomized experiments in Kenya and Malawi, we document higher savings among households scheduled to wait longer before receiving lump-sum transfers. We discuss implications of our results through a model of mental accounting.

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 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.

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.