Insufficient Sleep and Intra-Day Financial Decision-Making: Evidence from Online Lending

Abstract

Using online lending microdata, I show that sleep has important consequences for household financial outcomes. I find that insufficient sleep has a significant impact on credit risk, particularly for loans that are applied for in the early morning. This effect diminishes as the day progresses, with applications submitted later in the afternoon and evening being unaffected. For identification, I apply a spatial regression discontinuity design leveraging exogenous discontinuities in sunset time across time zone boundaries, supplemented by additional identification strategies, including daylight savings time shifts. The results also suggest that the psychological mechanism behind this effect is increased levels of heuristic thinking resulting from the cognitive deficits commonly associated with sleep loss. Overall, the evidence indicates sleep has important implications for household financial behavior and welfare