Essays in Behavioral and Labor Economics

This dissertation explores the intersection between behavioral economics and labor economics. We examine how behavioral mechanisms impact labor market decisions in the gig economy in the United States and for domestic workers in Brazil. The gig economy provides us with a setting to explore how cognitive biases impact job choices and labor supply decisions in flexible work environments. Studying domestic work in a developing country allows for an analysis of how social norms, driven by legislative changes, affect labor market outcomes such as formality rates and wages./nIn the first chapter, we study gig jobs on online platforms. Flexibility is an increasingly prominent feature of many jobs. In the gig economy, workers can choose their work hours and face wages that vary across hours and weeks. This increased complexity adds challenges to predicting and understanding job outcomes. Incomplete information or behavioral biases can then lead to inaccurate beliefs about pay and labor supply. We test this hypothesis by collecting novel survey data on 454 delivery and ride share gig workers in the United States. Comparing gig workers’ beliefs with data on their actual job performance, we find they overestimate their predictions (43%) and their recalls (31%) of weekly pay, despite it being reported prominently in their earnings statements. Furthermore, gig workers underestimate expenses and overestimate hours worked. The results are consistent with selective recall: when forming and updating their beliefs in noisy environments, workers overweight past high-paying periods. We then examine how biased beliefs affect labor market decisions. We derive predictions from a behavioral labor supply model and test them using survey data and a randomized de-biasing intervention. We find that job choices and labor supply decisions are significantly affected by mistaken beliefs in flexible gig jobs./nIn the second chapter, we investigate the role of social norms in shaping labor market outcomes in the context of domestic work (DW) in Brazil. We study the effects of Constitutional Amendment (CA) 72/13, which aimed to give additional labor rights to domestic workers, and Complementary Law (CL) 150/15. We highlight a two-year period when: (i) this legislation was in effect and was heavily discussed, as shown by internet searches; (ii) its contents were on hold. This allows us to focus on the expressive power of the law in altering social norms around employing informal workers. We employ an event study framework with a control group. Our results show that CA 72 led to a 3 to 6 percentage point increase in the formality rate of DWs, despite an increase in formal labor costs. This is coupled with a decrease in the total number of DWs. We also identify a decrease in average weekly hours worked and an increase in average monthly wages of DWs. These findings are consistent with changing social norms as an important mechanism. Our analysis reveal that DWs who live with their employers experience much larger formalization effects from CA 72 and CL 150. This suggests that the social norms channel is particularly significant in situations where the employer-employee relationship is close. Moreover, we investigate the neighborhood ``peer effects'' of worker exposure to other domestic and/or formal workers. Our analysis shows that a higher number of DWs (or formalization events) in a neighborhood increases the likelihood of DW formalization. Exposure to formality discussions may thus enhance the social norms impact of new legislation.

Advisor: DellaVigna, Stefano