The return of sleep.

While most individuals spend a substantial amount of time sleeping, Japan is among the developed countries whose residents register the fewest number of hours of sleep. I thus examine the causal effects of sleep on labor productivity, utilizing panel datasets for Japanese men. The potential endogeneity of deciding how many hours to sleep is addressed by using fixed effects panel data models with an instrumental variable estimation technique. Exploiting the annual variation in the average sunshine duration between cities as an instrument, I then show that a one-hour increase in the weekly number of hours of sleep increases the wage rate by up to 6-8% on average. These results suggest that sleep duration could enhance labor productivity.