In this seminar a paper is presented that 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 rural-urban 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 self-control problems as a candidate explanation. I elicit a measure of present bias in a tightly-controlled 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.
