Limited attention and income distribution

Economists have long been interested in the idea that there is a direct circular relation between poverty and low productivity, and not just one that is mediated by market failures, usually in asset markets. The nutrition-based e¢ ciency wage model (Dasgupta-Ray, 1987) is the canonical example of models where this happens: Howevrer it has been variously suggested (see for example Srinivasan, 1994) that the link from nutrition to productivity and especially the link from productivity to nutrition is too weak to be any more than a small part of the story. Partha Dasgupta himself acknowledges this when he writes "nutritionproductivity construct provides a metaphor,..., for ... an economic environment harboring poverty traps" (Dasgupta, 1997, page 5). We propose an alternative approach to this question based on the idea that attention is a scarce resource that is important for productivity. Speci…cally, people may not be able to fully attend to their jobs if they are also worrying about problems at home and Departments of Economics, Massachusetts Institute of Tecnology and Harvard University; Addresses: 252d, 50 Memorial Drive, Cambridge MA 02142 and Littauer Center M18, Harvard University, Cambridge MA 02138; [email protected] and [email protected]. We thank Emir Kamenica for valuable comments.