Circadian rhythms, sleep deprivation and cognitive skills: Evidence from an unsleeping giant

Despite the growing number of studies on time-use and the fact that we spend roughly a third of our time sleeping, economists have largely ignored the effects of sleeping behavior on health, human capital and productivity. On the contrary, there are several medical studies showing that insufficient sleep is associated with adverse health outcomes. However, most of these studies are not able to distinguish between whether sleep deprivation negatively affects health or is a marker for poor health. Furthermore, we know relatively little about the effects of insufficient sleep on cognitive skills, and even less about the role of sleep deprivation in developing contexts. This paper analyzes the effects of sleep duration on cognitive skills of older workers in China. We exploit the relationship between circadian rhythms and bedtime to identify the effects of sleep using sunset time as an instrument. Using the Chinese Health and Retirement Longitudinal Study, we show that sleeping time significantly increases cognitive skills and eases depression symptoms of workers aged over 45 years. The results are driven by employed individuals living in urban areas, who are more likely to be constrained by rigid working schedules. Our results suggest that increasing the awareness of the negative effects of sleep deprivation is crucial for the design of policies aimed at reducing the cognitive decline associated with ageing. Increasing the attention on the importance of sleep may have non trivial effects on both cognitive skills and mental health of older workers. Interventions along this direction may be particularly beneficial in developing countries with an increasingly ageing population. Finally, our findings highlight that the misalignment between working schedules and our biological rhythms may have important negative effects on human capital.