CDEP-CGEG Working Paper No. 3

Self-Control at Work

Supreet Kaur, Michael Kremer and Sendhil Mullainathan

Abstract
Workers with self-control problems do not work as hard as they would like. This changes the logic of agency theory by partly aligning the interests of the firm and worker: both now value contracts that elicit more effort in the future. Three findings from a year-long field experiment with data entry workers suggest the quantitative importance of self-control at work. First, workers choose dominated contracts—which penalize low output but provide no greater reward for high output—36% of the time to motivate their future selves; use of these contracts increases output by the same amount as an 18% increase in the piece-rate. Second, effort increases as the (randomly assigned) payday gets closer: output rises 8% over the pay week; calibrations show that justifying this would require a 4% daily exponential discount rate. Third, for both findings there is significant and correlated heterogeneity: workers with larger payday effects are both more likely to choose dominated contracts and show greater output increases under them. This correlation grows with experience, consistent with the hypothesis that workers learn about their self-control problems over time. We conclude with a model of how self-control heterogeneity creates an adverse selection problem for firms; we show that firms may impose high-powered incentives and job design features that benefit workers with self-control problems, but this need not be socially optimal because it creates costs for time consistent workers.

Download paper as PDF