Papers - Natural

Christina Gravert, Mette Trier Damgaard

Cited by*: 9 Downloads*: 63

We document the hidden costs of one of the most policy-relevant nudges, reminders. Sending reminders, while proven effective in facilitating behavior change, may come at a cost for both senders and receivers. Using a large scale field experiment with a charity, we find that reminders increase donations, but they also substantially increase unsubscriptions from the mailing list. To understand this novel finding, we develop a dynamic model of donation and unsubscription behavior with limited attention which is tested in reduced-form using a second field experiment. We also estimate our model structurally to perform a welfare analysis. We show that when not accounting for the hidden costs of reminders the average welfare effects for donors are overstated by a factor of ten and depending on the discount factor the welfare effects of the charity may be negative. Our results show the need to evaluate nudges on their intended as well as unintended consequences.

Per Fredriksson , John A List, Daniel L Millimet

Cited by*: 8 Downloads*: 1

Empirical evidence suggesting that a considerable amount of horizontal strategic interaction exists amongst governments is important in light of recent devolutionary trends of many important public programs. The empirical approach in these studies typically relies on estimating reaction functions in a uni-dimensional policy framework, where a nonzero slope estimate is interpreted as evidence in support of strategic interactions. While this framework is a useful representation within certain contexts, it is potentially too restrictive; for example, in models of resource competition, localities may use multiple instruments in their recruiting pursuits, leading to potential strategic interactions across policy instruments. In this study, we first develop a simple theoretic construct that includes resource competition in a world of three-dimensional policy choice. The model suggests that while a zero-sloped reaction function may exist for any particular policy, this does not necessarily imply the absence of strategic interactions. We examine the implications of the model empirically using US state-level panel data over the period 1977-1994. The results suggest that important cross-policy strategic interactions exist, lending support in favor of the multi-dimensional framework, and indicate that uni-dimensional frameworks may present lower bound estimates of the degree of strategic interaction.

John A List, Warren McHone , Daniel L Millimet

Cited by*: 8 Downloads*: 4

The Clean Air Act and its subsequent amendments have been lauded as the primary stimulant to the impressive improvement in local air quality in the US since 1970. A key component of these regulations is the New Source Review (NSR) requirement, which includes the contentious stipulation that when an existing plant seeks to modify its operations, the entire plant must comply with current standards for new sources. This requirement was included to improve air quality in dirty areas, and prevent a deterioration of air quality in clean areas. Yet, whether NSR provides the proper plant-level incentives is unclear: there are strong disincentives to undertake major plant modifications to avoid NSR. In our examination of more than 2500 and 2200 plant-level modification decisions and closures, respectively, we find empirical evidence suggesting that NSR retards modification rates, while doing little to hasten the closure of existing dirty plants.

Paul Dolan, Robert D Metcalfe

Cited by*: 8 Downloads*: 6

There is increasing research on the exogenous impact of descriptive social norms on economic behavior. The research to date has a number of limitations: 1) it has not de-coupled the impact of the norm and the knowledge required to understand how to change behavior based upon it; 2) it has exclusively used offline but not online (i.e. emails) methods; and 3) it has not understood the impact of financial incentives in conjunction with norms. We address these three limitations using two natural field experiments. We find, firstly, that norms change energy behavior over a 15 month treatment period irrespective of whether information is provided or not. We find that social norms reduce consumption by around 6% (0.2 standard deviations). Norms have has their largest impact on the day that information on the social norm is received, and then decreases over time. Secondly, we do not find that social norms work online (even with experienced consumers who are used to online billing) - social norms de- livered online may have very little beneficial effects on reducing energy use. Thirdly, we find that large financial rewards work very well online in reducing consumption, with a 0.35 change in energy consumption over a four month period. Perhaps most interestingly, we find that the large effect of financial incentives is completely removed when information on social norms is added online.

Alexandre Mas, Amanda Pallais

Cited by*: 8 Downloads*: 3

We use a field experiment to study how workers value alternative work arrangements. During the application process to staff a national call center we randomly offered applicants choices between traditional M-F 9am - 5pm office positions and alternatives. These alternatives include flexible scheduling, working from home, and positions that give the employer discretion over scheduling. We randomlyvaried the wage difference between the traditional option and the alternative, allowing us to estimate the entire distribution of willingness to pay (WTP) for these alternatives. We validate our results using a nationally-representative survey. The great majority of workers are not willing to pay for flexible scheduling relative to a traditional schedule: either the ability to choose the days and times of work or the number of hours they work. However, the average worker is willing to give up 20% of wages to avoid a schedule set by an employer on a week's notice. This largely represents workers' aversion to evening and weekend work, not scheduling unpredictability. Traditional M-F 9am - 5pm schedules are preferred by most jobseekers. Despite the fact that the average worker isn't willing to pay for scheduling flexibility, a tail of workers with high WTP allows for sizable compensating differentials. Of the workerfriendly options we test, workers are willing to pay the most (8% of wages) for the option of working from home. Women, particularly those with young children, have higher WTP for work from home and to avoid employer scheduling discretion. They are slightly more likely to be in jobs with these amenities, but the differences are not large enough to explain any wage gaps.

Paul Glewwe, Michael Kremer, Sylvie Moulin

Cited by*: 8 Downloads*: 51

Although there is intense debate about the effect of increased expenditure on education in developed countries, there is widespread consensus that provision of textbooks can substantially increase test scores in developing countries. This paper evaluates a program through which a Dutch non-profit organization provided textbooks to 25 rural Kenyan primary schools that were chosen randomly from a group of 100 candidate schools. After one school year, average test scores did not differ substantially between program and comparison schools. However, for those students in the top quintile of the distribution of initial academic achievement, the program raised test scores by at least 0.2 standard deviations.

John A List, Michael K Price

Cited by*: 8 Downloads*: 7

One fact that has emerged in modern societies is that people help others. Whether it is donating a few dollars to help feed the poor or volunteering time to help rebuild someone's life after a natural disaster, people around the globe commonly lend a hand. This study provides an overview of that support, summarizing gifts of both time and money around the globe. We also highlight research that indicates useful ways in which we can enhance the charitable pie. Our discussion revolves around both individual giving and corporate philanthropy, but we focus on empirical insights from recent charitable fundraising field experiments in the Western World. We present information that is useful for policymakers, fundraising practitioners, and academicians.

Armin Falk

Cited by*: 8 Downloads*: 17

This study reports data from a field experiment that was conducted to investigate the relevance of gift-exchange for charitable giving. Roughly 10,000 solicitation letters were sent to potential donors in the experiment. One third of the letters contained no gift, one third contained a small gift and one third contained a large gift. Whether a potential donor received a letter with or without a gift was randomly determined. We observe strong and systematic effects from including gifts. Compared to the no gift condition, the relative frequency of donations increased by 17 percent if a small gift was included and by 75 percent for a large gift. Consequently, including gifts was highly profitable for the charitable organization. The contribution of this paper is twofold: first, it shows that gift-exchange is important for charitable giving, in addition to the warm-glow motive. Second, the paper confirms the economic relevance of reciprocity by using field data. This extends the current body of research on reciprocity, which is almost exclusively confined to laboratory studies.

Michael Kremer, Edward Miguel

Cited by*: 7 Downloads*: 13

The history of foreign development assistance is one of movement away from addressing immediate needs and toward focusing on the underlying causes of poverty. A recent manifestation is the move towards sustainability,' which stresses community mobilization, education, and cost-recovery. This stands in contrast to the traditional economic analysis of development projects, with its focus on providing public goods and correcting externalities. We examine evidence from randomized evaluations on strategies for combating intestinal worms, which affect one in four people worldwide. Providing medicine to treat worms was extremely cost effective, although medicine must be provided twice per year indefinitely to keep children worm-free. An effort to promote sustainability by educating Kenyan schoolchildren on worm prevention was ineffective, and a mobilization' intervention from psychology failed to boost deworming drug take-up. Take-up was highly sensitive to drug cost: a small increase in cost led to an 80 percent reduction in take-up (relative to free treatment). The results suggest that, in the context we examine, the pursuit of sustainability may be an illusion, and that in the short-run, at least, external subsidies will remain necessary.

Rama Katkar, David Lucking-Reiley

Cited by*: 7 Downloads*: 13

Sellers in eBay auctions have the opportunity to choose both a public minimum bid amount and a secret reserve price. We ask, empirically, whether the seller is made better or worse off by setting a secret reserve above a low minimum bid, versus the option of making the reserve public by using it as the minimum bid level. In a field experiment, we auction 50 matched pairs of Pokemon cards on eBay, half with secret reserves and half with equivalently high public minimum bids. We find that secret reserve prices make us worse off as sellers, by reducing the probability of the auction resulting in a sale, deterring serious bidders from entering the auction, and lowering the expected transaction price of the auction. We also present evidence that some sellers choose to use secret reserve prices for reasons other than increasing their expected auction prices.

Todd Cherry, John A List

Cited by*: 7 Downloads*: 3

This paper uses county-level panel data to test the appropriateness of the 'one size fits all' reduced-form regression approach commonly used when estimating the economic model of crime. Empirical results provide initial evidence that previous studies, which restrict deterrent effects to have identical impacts across crime types, may be presenting statistically biased results.

Andreas Leibbrandt, John A List

Cited by*: 7 Downloads*: 74

One explanation advanced for the persistent gender pay differences in labor markets is that women avoid salary negotiations. By using a natural field experiment that randomizes nearly 2,500 job-seekers into jobs that vary important details of the labor contract, we are able to observe both the nature of sorting and the extent of salary negotiations. We observe interesting data patterns. For example, we find that when there is no explicit statement that wages are negotiable, men are more likely to negotiate than women. However, when we explicitly mention the possibility that wages are negotiable, this difference disappears, and even tends to reverse. In terms of sorting, we find that men in contrast to women prefer job environments where the 'rules of wage determination' are ambiguous. This leads to the gender gap being much more pronounced in jobs that leave negotiation of wage ambiguous.

John A List, Warren McHone

Cited by*: 7 Downloads*: 2

This paper uses state-level pollution data from 1986-1997 to construct two indices that rank U.S. states according to environmental outputs. A major finding is that marginal performers in other indices, such as Wyoming, garner top spots in these ranking systems. The paper also presents findings from fixed and random effects models of panel data that imply state income levels are positively associated with environmental outputs after a threshold level of income is obtained.

Marianne Bertrand, Dean S Karlan, Sendhil Mullainathan, Eldar Shafir, Jonathan Zinman

Cited by*: 7 Downloads*: 23

Numerous laboratory studies find that minor nuances of presentation and description change behavior in ways that are inconsistent with standard economic models. How much do these context effect matter in natural settings, when consumers make large, real decisions and have the opportunity to learn from experience? We report on a field experiment designed to address this question. A South African lender sent letters offering incumbent clients large, short-term loans at randomly chosen interest rates. The letters also contained independently randomized psychological "features" that were motivated by specific types of frames and cues shown to be powerful in the lab, but which, from a normative perspective, ought to have no impact. Consistent with standard economics, the interest rate significantly affected loan take-up. Inconsistent with standard economics, some of the psychological features also significantly affected take-up. The average effect of a psychological manipulation was equivalent to a one half percentage point change in the monthly interest rate. Interestingly, the psychological features appear to have greater impact in the context of less advantageous offers and persist across different income and education levels. In short, even in a market setting with large stakes and experienced customers, subtle psychological features appear to be powerful drivers of behavior. The findings pose a challenge for the social sciences: they suggest that psychological nuance matters but may be inherently difficult to predict given the impact of context. Successful incorporation of psychological features into field studies is likely to prove a vital, but nontrivial, addition to the formation of more general theories on when, why, and how frames and cues influence important decisions.

Steven D Levitt, John A List, Chad Syverson

Cited by*: 7 Downloads*: 12

Productivity improvements within establishments (e.g., factories, mines, or retail stores) are an important source of aggregate productivity growth. Past research has documented that learning by doing-productivity improvements that occur in concert with production increases-is one source of such improvements. Yet little is known about the specific mechanisms through which such learning occurs. We address this question using extremely detailed data from an assembly plant of a major auto producer. Beyond showing that there is rapid learning by doing at the plant, we are able to pinpoint the processes by which these improvements have occurred.

Ginger Z Jin, Andrew Kato

Cited by*: 6 Downloads*: 27

Economists accept consumer frauds as an equilibrium outcome of information costs. This paper empirically investigates what information is costly, what contribute to the information costs, and what institutions are more effective in reducing the information costs. We focus on one of the most complained about markets - Internet auctions. In a field experiment, we obtain actual baseball cards from both online and retail markets whose quality are then professionally graded and compared to the prices paid by online buyers for goods with similar claims. The experiment allows us to obtain a key variable - true quality - on top of price and seller ratings used in the existing literature. Our findings indicate that some naive buyers in the online ungraded market are misled by non-credible claims of quality. They pay higher prices but do not receive better quality and in fact are defrauded more often. In comparison, claim-driven frauds do not exist in retail or graded markets where buyers can observe card quality either through careful quality examination before purchase or a third-party grading service. Online seller reputation is found to be effective for identifying good-faith sellers. But conditional on completed auctions, reputable sellers do not provide better quality. More disturbingly, the price increase from making non-credible claims more than compensates for the lower likelihood of sale for sellers with low reputations. We attribute the naivete to misleading signals in the online ungraded market and two loopholes in the eBay rating system, namely universal rating and costless switching of anonymous identities. These loopholes reduce the precision and accessibility of seller information, and therefore add difficulties for naive buyers to become sophisticated. We also point out that naive buyers could impose several negative externalities on the other good-faith players in the market.

Joshua D Clinton, John S Lapinski

Cited by*: 6 Downloads*: 6

Scholars disagree whether negative advertising demobilizes or stimulates the electorate. We use an experiment with over 10,200 eligible voters to evaluate the two leading hypotheses of negative political advertising. We extend the analysis to examine whether advertising differentially impacts the turnout of voter subpopulations depending on the advertisement's message. In the short term, we find no evidence that exposure to negative advertisements decreases turnout and little that suggests it increases turnout. Any effect appears to depend upon the message of the advertisement and the characteristics of the viewer. In the long term, we find little evidence that the information contained in the treatment groups' advertisements is sufficient to systematically alter turnout.

Macartan Humphreys, William Masters, Martin Sandbu

Cited by*: 6 Downloads*: 6

Despite a widespread trend towards the adoption of increasingly participatory approaches to political decision-making in developing countries there is little or no evidence that these practices in fact return the benefits attributed to them. We present an empirical investigation into one specific worry-that participatory decision processes may be vulnerable to manipulation by elites. We report on a field experiment on the effects of leaders, drawing on a unique nationwide experiment in democratic deliberation in Sao Tome and Principe. In these deliberations, meetings were moderated by discussion leaders who were randomly assigned to run meetings around the country. The randomization procedure provides a rare opportunity to identify the impact of leaders on the outcomes of group deliberations. We find that leadership effects were extremely large, in many cases accounting for over one third of all variation in the outcomes of the national discussions. These results have important implications for the design of such deliberative practices. While the total effect of leadership cannot be assessed, it is possible to observe leadership effects and to correct for variation in outcomes of meetings.

Alan S Gerber, Donald P Green, Matthew N Green

Cited by*: 6 Downloads*: 3

Political campaigns currently make extensive use of direct mail, particularly in state and local races, yet its effects on voter behavior are not well understood. This essay presents the results of large-scale randomized field experiments conducted in Connecticut and New Jersey during state and municipal elections of 1999. Tens of thousands of registered voters were sent from zero to nine pieces of direct mail. The target populations included party registrants with a strong history of voter participation, independents, and a random subset of registered voters. Our results indicate partisan campaign mail does little to stimulate voter turnout and may even dampen it when the mail is negative in tone.

Benjamin A Olken

Cited by*: 6 Downloads*: 26

This paper examines the accuracy of beliefs about corruption, using data from Indonesian villages. Specifically, I compare villagers' stated beliefs about the likelihood of corruption in a road-building project in their village with a more objective measure of 'missing expenditures' in the project, which I construct by comparing the project's official expenditure reports with an independent estimate of the prices and quantities of inputs used in construction. I find that villagers' beliefs do contain information about corruption in the road project, and that villagers are sophisticated enough to distinguish between corruption in the road project and other types of corruption in the village. The magnitude of their information, however, is small, in part because officials hide corruption where it is hardest for villagers to detect. This may limit the effectiveness of grass-roots monitoring of local officials. I also find evidence of systematic biases in corruption beliefs, particularly when examining the relationship between corruption and variables correlated with trust. For example, ethnically heterogeneous villages have higher perceived corruption levels but lower actual levels of missing expenditures. The findings illustrate the limitations of relying solely on corruption perceptions, whether in designing anti-corruption policies or in conducting empirical research on corruption.