Abstract

High absenteeism and excess labor supply often coexist in labor markets across developing countries, creating significant challenges for both firms and workers. In this paper, we show that workers frequently experience unpredictable disrup- tions to their daily labor supply, hindering their ability to work regularly. Using an incentivized-choice experiment with 605 participants, we find that individuals are willing to forgo 8% of total potential earnings for day-to-day flexibility – specif- ically the ability to take time off without advance planning or notice. Randomly offering day-to-day flexibility leads to a 47% increase in contract compliance and a 13% increase in total earnings. Next, we document that demands from individ- uals’ social networks are substantial and contribute to labor supply disruptions. Consistent with this mechanism, demand for day-to-day flexibility is significantly higher when caste-based network demands are more likely to bind. Our findings provide new insight into how worker demand for flexibility shapes labor supply in developing countries.