Time Use and Labor Productivity: The Returns to Sleep

We investigate how the largest use of time—sleep—affects productivity. Time use data from the United States allow us to test a model in which sleep improves productivity. Consistent with theory, we find sleep is more complementary to home production than to leisure for nonemployed individuals. We then show that later sunset time reduces worker sleep and earnings. After ruling out alternative hypotheses, we implement an instrumental variables specification that provides causal estimates of the impact of sleep on earnings. A 1-hour increase in location-average weekly sleep increases earnings by 1.1% in the short run and 5% in the long run.