The London School of Economics study shows that sleep deprivation exerts a strong negative effect on labour market performance. They exploit variations in child sleep quality to instrument for parental sleep quality.
A one-hour reduction in sleep duration significantly decreases labour force participation, the number of hour’s worked and household income. In addition, they find that low-skilled mothers are more likely to opt out of the labour market and work less hours than high-skilled mothers when exposed to sleep deprivation.
They argue that sleep is a major determinant of employment outcomes that needs more attention in designing economic models of time allocation and employment policies.
Source: Costa-Font, Joan and Flèche, Sarah (2017) Parental sleep and employment: evidence from a British cohort study. CEP Discussion Papers, CEPDP1467. Centre for Economic Performance, London School of Economics and Political Science, London, UK.