Week 10 FE

True or false? Given how many reasons the poor have to be unhappy, it is a foregone conclusion that the poor are less happy than the rich, so there is nothing to be gained from studying this topic. True False

F Explanation It is not self-evident that the poor are less happy than the rich. Just because we can think of more reasons for which the poor should be unhappy doesn't mean they actually are. And even if they are, there is still a question of magnitude: how much less happy? Finally, if we can identify the primary drivers of unhappiness, then we have a better sense of what to target with interventions.

Happiness is highly correlated with income — richer countries are happier; and as countries become richer, they also become happier. Therefore, a reasonable approach to increase happiness in poor countries might be to focus on improving income for the entire country. True or false? The same is true of depression — richer countries are less depressed, so we should focus on improving poor countries' incomes to reduce depression.

F Explanation The evidence suggests that depression rates are similar in poor and in rich countries — and, if anything, even higher in rich countries — so we have little reason to suspect that increasing incomes will decrease depression. Depression seems to be more about within-country comparisons: if my income is much less than that of my neighbor, I am more likely to feel depressed, no matter how rich both of us are in absolute terms.

The researchers found that increasing night-time sleep had little effect on productivity, well-being, cognition, or preferences. True or false? They found that naps were beneficial across the board, with no downsides. True False

F Explanation They found one downside to napping: that time spent napping has to come from somewhere, and for the nap treatment group, it appears that they spent less time working, and therefore earned less money overall. Although naps appear to impart a wide range of benefits, it is not without tradeoffs.

True or false? We have evidence that suggests a causal relationship between poverty and mental health. True False

T Explanation For example, the McGuire et al. (2022) meta-analysis of cash transfer experiments found a fairly consistent positive effect of cash on subjective well-being and mental health.

Based on the results from Kaur et al (2021), what should firms in developing countries do if they want to boost the productivity of their workers? Select all that apply. Pay them earlier. Pay them more. Give them breakfast. Take their financial well-being into consideration.

D Explanation Although their results showed that those who were paid earlier were more productive, it is not obvious that those effects would have continued; in fact, it is likely that they would have reversed after Day 12, at which point the control group got paid more than the treatment group. In the long run, workers might shift their borrowing habits to take into account the earlier pay, undoing any of the gains. The study did not vary total pay nor did it find any variation in breakfast consumption between the two groups, so cannot speak to whether those would affect productivity. The results provide evidence that the reduced financial stress in the treatment group drove their productivity improvement.

Which of the following are true about the results of Bessone et al (2019)? Most previous experiments on sleep had been conducted in a lab, not in the field. Experts were surprised: they had expected to find large benefits of additional sleep. Although they supplied the participants with many items that seemed like they would be helpful, the researchers failed to improve the respondents' sleep quality. The participants are making sub-optimal sleep decisions: their lives would be measurably improved if they slept more.

A, B, C Explanation The first two responses might be related: perhaps experts had expected to find large benefits of more sleep because other experiments — which were conducted in a lab, where conditions are more conducive to high quality sleep than those of the participants in Chennai — did, in fact, find large benefits of more sleep. The researchers failed to improve sleep quality, despite supplying the treatment group with ear plugs, eye shades, etc., which seemed like they would help given the participants' sleeping arrangements. They did manage to increase sleep duration, but not through increased efficiency; as a result, participants spent less time working, leaving them with less income. It is not obvious that they'd be better off if they slept more, given the tradeoff they have to make.

What was the point of the Strack, Martin, and Schwarz (1988) study? Dating makes people unhappy. Emotions can be manipulated by survey design. Happiness is impossible to measure accurately. Question order always matters.

B Explanation Simply changing the order of the questions changed how "happy" respondents felt. This does not mean happiness is impossible to measure, just that one needs to be careful with survey design.

Classical economic theory would suggest that during Days 8-12 (the "Post-Pay Period"), compared to the control group, the productivity of the treatment group should be... Higher because they are less stressed. The same because the incentives are unchanged. Lower because of the income effect. Uncertain because they may not trust the researchers.

B Explanation The workers in both groups are still getting paid the same piece-rate during Days 8-12, so the incentives are the same across both groups. Having gotten paid on Day 8 does not change how much you get paid for work done Days 8-12. Stress is not relevant in classical economic theory. The income effect does not differ across groups: both should have earned the same amount of money on average; the early payout for the treatment group does not affect income. Trust could be relevant, but it shouldn't differ much across the two groups, since both got paid on Day 1.

What was the primary sleeping challenge for the participants in the Bessone et al. (2019) study in Chennai? Time in bed Staying up too late Sleep quality Tamil, the primary language in Chennai, doesn't have words for numbers beyond 100, so people run out of sheep to count when trying to fall asleep.

C Explanation The people in the study spend about as much time in bed as the typical American, but they have much more trouble staying asleep. Professor Schilbach lists many possible reasons for this low quality sleep.