Limited Attention and Income Distribution

By Abhijit Banerjee, Sendhil Mullainathan. 2008

147 citations recorded by the source corpus.

Economists have long been interested in the idea that there is a direct circular relation between poverty and low productivity, and not just one that is mediated by market failures, usually in asset markets. The nutrition-based efficiency wage model (Partha Dasgupta and Debraj Ray, 1987) is the canonical example of models where this happens: However it has been variously suggested (see for example T. N. Srinivasan, 1994) that the link from nutrition to productivity and especially the link from productivity to nutrition is too weak to be any more than a small part of the story. Partha Dasgupta himself acknowledges this when he writes "nutrition-productivity construct provides a metaphor,..., for ... an economic environment harboring poverty traps" (Partha Dasgupta, 1997, page 5). We propose an alternative approach to this question based on the idea that attention is a scarce resource that is important for productivity. Specifically, people may not be able to fully attend to their jobs if they are also worrying about problems at home and being distracted in this way reduces productivity. But not paying attention at home is also costly: early symptoms of a child's sickness may go unnoticed; water may run out at the end of the day; kerosene for lighting lamps at home might run out and make it hard to do homework; etc. Finally, the extent to which home life distracts depends on the nature of home life. Specifically, certain goods (e.g. a good baby sitter, a 24-hour piped water supply, a connection to a power supply grid) can reduce the extent of home life distraction. These three assumptions generate an interesting relation between income and productivity that is at the core of our model. The non-poor in this model, by virtue of owning distraction-saving goods and services at home, are able to focus more on their work. Hence they will be more productive at work and will be able to afford more distraction-saving goods. This simple two-way relationship between income and productivity produces a discontinuity in the relation between human capital and earnings which is certain cases can lead to a poverty trap, even in the absence of any market failures.

Subfields: Economics and Econometrics, Sociology and Political Science, Soil Science

View Paper: https://www.semanticscholar.org/paper/fe0929f7bca62e424727864c694215d1e4c2cd10

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Sociology and Political Science

In Soil Science

Sendhil Mullainathan

Citations in the corpus

Time Use and Labor Productivity: The Returns to Sleep (2018, background): “Such suboptimal sleep could contribute to the type of time use poverty trap analyzed by Banerjee and Mullainathan (2008).19 On the other hand, suboptimal sleep could arise from behavioral considerations like time inconsistency or constraints on cognitive resources (see, e.g., Mani et al., 2013).”
Citizens and Service Delivery: Assessing the Use of Social Accountability Approaches in Human Development Sectors (2011, background): “Members of poor households may not have time for participation in local governance because of more pressing priorities such as securing food and meeting other basic needs (Banerjee and Mullainathan 2008).”
Behavioral Design: A New Approach to Development Policy (2014, background): “Within development, for example, it has provided fresh insights into crucial questions about why the poor stay poor (see Banerjee and Mullainathan 2008; Bernheim et al. 1999, 2013).”
Saving Rates and Poverty: The Role of Conspicuous Consumption and Human Capital (2012, unknown): “10In another paper, Banerjee and Mullainathan (2008) suggest that ‘comfort goods’ can help divert workers’ attention from pressing problems at home so that workers who can afford such goods can pay more attention at work.”
Universal Basic Income in the Developing World (2019, unknown): “Mechanisms like these can generate poverty traps in which the poor remain poor because they cannot afford lumpy bandwidth-conserving investments that the rich make (Banerjee and Mullainathan, 2008).”