Speaker
Description
We study the labour market impact of the “Veblen effect” by estimating the relation between inequality and average work hours in society and how the effect varies between the poor and the nonpoor. Using data on actual hours worked by members of a household from India’s Periodic Labour Force Survey, we report three main findings. First, members belonging to absolutely and relatively poor households work for fewer hours than those in non-poor households. We observe that absolutely poor (relatively poor) households work for almost 45 (22) minutes less per day than the average working hours of non-poor households. Second, the impact of inequality (measured by a 90/50 percentile ratio) on average work hours is positive, large, and statistically significant. A one standard deviation increase in the regional 90/50 percentile ratio is associated with a 2.8 percent increase in the average work hours of a non-poor household. However, the impact of increased inequality on the increase in the work hours of absolutely poor households is smaller. Overall, higher inequalities induce poor households to work more by 1.68 percent. Third, we also find evidence that poor households do show more willingness to work for additional hours than non-poor households.
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