In Search of a Better Life: Self-Control in the Ethiopian Labor Market∗

This paper investigates whether present bias correlates with savings and job search behavior in a population of low-skill workers in Ethiopia. I conduct a field experiment with 460 women who begin employment in the ready-made garment industry. Most are ruralurban migrants without work experience for whom the job represents a stepping stone into the labor market. Almost all workers plan to use their jobs to save money and to look for higher-wage employment, but many fall short of their intentions. I propose selfcontrol problems as a candidate explanation. I elicit a measure of present bias in a tightlycontrolled experiment and match results to high-frequency survey data that I collect over a period of three months. Present bias is a significant predictor of job search effort, controlling for liquidity and a broad range of covariates. Present-biased workers spend 57 percent less time on job search per week. As a result of reduced search, present-biased workers generate fewer offers and stay in their jobs significantly longer. In contrast, I find no significant correlation between present bias and savings behavior. I discuss implications for the design of commitment devices in this context. ∗I want to thank Michèle Belot and Arthur Schram for invaluable advice and support. The paper has benefited from helpful comments by Liang Bai, Kevin Croke, Anita Glenny, Morgan Hardy, Andrea Ichino, Pamela Jakiela, Gisella Kagy, Philipp Kircher, Peter Kuhn, David K. Levine, Egon Tripodi, Chris Udry, and seminar audiences at the EUI and IZA Summer School 2018. This study would not have been possible without the outstanding work of my field coordinator Endale Geberemedehen, my survey team, and the help of Wendemagegn Zewdu. Tewodros Gebrewolde kindly agreed to serve as local research ethics advisor. Roberto Lescrauwaet and Eyoual Tamrat provided research assistance. Funding from UK Department for International Development (DFID), the European Commission, the European University Institute, the Institute for the Study of Labor (IZA) and DFID through the GLM-LIC program, New York University Abu Dhabi, and the World Bank ieConnect for Impact program is gratefully acknowledged. This study was registered with the AER RCT Registry as #AEARCTR-0002555 and received IRB approval at NYU Abu Dhabi as protocol #020-2018. †European University Institute, Department of Economics, Villa La Fonte, Via delle Fontanelle 18, 50014 San Domenico di Fiesole, Italy. Q christian.meyer@eui.eu, chrmeyer.com