Papers - Natural

John Gibson, David McKenzie, Steven Stillman

Cited by*: 3 Downloads*: 13

People migrate to improve their well-being, whether through an expansion of economic and social opportunities or a reduction in persecution. Yet a large literature suggests that migration can be a very stressful process, with potentially negative impacts on mental health reducing the net benefits of migration. However, to truly understand the effect of migration on mental health one must compare the mental health of migrants to what their mental health would have been had they stayed in their home country. The existing literature is not able to do this and typically settles for comparing the mental health of migrants to that of natives in the destination country, which takes no account of any pre-existing differences between these groups. This paper overcomes the selection problems affecting previous studies of the effect of migration on mental health by examining a migrant lottery program. New Zealand allows a quota of Tongans to immigrate each year with a lottery used to choose amongst the excess number of applicants. A unique survey conducted by the authors in these two countries allows experimental estimates of the mental health effects of migration to be obtained by comparing the mental health of migrants who were successful applicants in the lottery to the mental health of those who applied to migrate under the quota, but whose names were not drawn in the lottery. Migration is found to lead to improvements in mental health, particularly for women and those with poor mental health in their home country.

Mirco Tonin, Michael Vlassopoulos

Cited by*: 3 Downloads*: 18

This paper presents evidence from a field experiment, which aims to identify the two sources of workers' pro-social motivation that have been considered in the literature: action-oriented altruism and output-oriented altruism. To this end we employ an experimental design that first measures the level of effort exerted by student workers on a data entry task in an environment that elicits purely selfish behavior and we compare it to effort exerted in an environment that also induces action-oriented altruism. We then compare the latter to effort exerted in an environment where both types of altruistic preferences are elicited. We find that action-oriented altruism accounts for a significant increase in effort, while there is no additional impact due to output-oriented altruism. We also find significant gender-related differences in the treatment effect: women are very responsive to the treatment condition eliciting action-oriented altruism, while men's behavior is not affected by any of the treatments.

Tanjim Hossain, John Morgan

Cited by*: 3 Downloads*: 8

We conducted 80 auctions on eBay. Forty of these auctions were for various popular music CDs while the remaining 40 auctions were for video games for Microsoft's Xbox gaming console. The revenue equivalence theorem states that any auction form having the same effective reserve price yields the same expected revenue. The effective reserve price on eBay consists of three components: the opening bid amount, the secret reserve amount, and the shipping and handling charge to keep the overall reserve level fixed. We set no secret reserve price and varied the opening bid and the shipping and handling charge to keep the overall reserve level fixed. When the effective reserve was $4, auctions with a low opening bid and high shipping charges attracted more bidders, earlier bidding, and yielded higher revenue than those with a high opening bid and low shipping charges. The same results hold only for Xbox games under the $8 effective reserve. Unlike the other treatments, where the reserve represents less than 30% of the retail price of the item, for CDs, the $8 effective reserve represents over 50% of the retail price of the item. In this treatment, we find no systematic difference in the number of bidders attracted to the auction or revenues as a function of how the effective reserve is allocated between opening bid and shipping charges. We show that these results can be accounted for by bounded-rational bidding behavior.

Omar Azfar, Clifford Zinnes

Cited by*: 3 Downloads*: 20

One conjecture in the theory of incentives is that incentives based on broader outcomes may be better at motivating agents than incentives based on narrow measures. We designed an experiment to test these hypotheses using a "prospective randomized evaluation procedure" (PREP). We then apply PREP to training programs as typically funded by donors of economic development assistance. We randomly assigned 274 participating entrepreneurs in the Philippines to one of 26, simultaneous, one-day, training classes in marketing. Trainers were given cash incentives based on the average score of their "students" on a standardized test containing an alternative number of questions, which were randomly assigned to each class. We then examined outcomes based on student satisfaction ratings of the trainer. Our results suggest that incentives based on broad outcomes are more effective than incentives based on narrow outcomes. We conclude with ways to improve our approach as well as with a discussion of the implications for using prospective randomized evaluation for improving the evaluation of donor projects.

Nava Ashaf, Dean S Karlan, Wesley Yin

Cited by*: 3 Downloads*: 9

Informal lending and savings institutions exist around the world, and often include regular door-to-door deposit collection of cash. Some banks have adopted similar services in order to expand access to banking services in areas that lack physical branches. Using a randomized control trial, we investigate determinants of participation in a deposit collection service and evaluate the impact of offering the service for micro-savers of a rural bank in the Philippines. Of 137 individuals offered the service in the treatment group, 38 agreed to sign-up, and 20 regularly used the service. Take-up is predicted by distance to the bank (a measure of transaction costs of depositing without the service) as well as being married (a suggestion that household bargaining issues are important). Those offered the service saved 188 pesos more (which equates to about a 25% increase in savings stock) and were slightly less likely to borrow from the bank.

Maria P Espinosa, Javier Gardeazabal

Cited by*: 2 Downloads*: 43

A disadvantage of multiple-choice tests is that students have incentives to guess. To discourage guessing, it is common to use scoring rules that either penalize wrong answers or reward omissions. These scoring rules are considered equivalent in psychometrics, although experimental evidence has not always been consistent with this claim. We model students' decisions and show, first, that equivalence holds only under risk neutrality and, second, that the two rules can be modified so that they become equivalent even under risk aversion. This paper presents the results of a filed experiment in which we analyze the decisions of subjects taking multiple-choice exams. The evidence suggests that differences between scoring rules are due to risk aversion as theory predicts. We also find that the number of omitted items depends on the scoring rule, knowledge, gender, and other covariates.

John A List, Anya Samek

Cited by*: 2 Downloads*: 14

Almost a third of US children ages 2-19 are deemed overweight or obese, and part of the problem is the habitual decision to consume high calorie, low nutrient foods. We propose that the school lunchroom provides a 'teachable moment' to engage children in making healthful choices. We conduct a field experiment with over 1,500 participants in grades K-8 and evaluate the impact of small non-monetary incentives on the selection of milk in the school lunchroom. At baseline, only 16% of children select white milk relative to 84% choosing chocolate milk. We find a significant effect of incentives, which increase white milk selection by 2.5 times, to 40%. One concern with incentives is that they may decrease intrinsic motivation to eat healthy, called 'crowd-out of intrinsic motivation.' However, we do not find evidence of 'crowd-out'; rather, we see some suggestive evidence of the positive habit forming effect of incentives.

Eric Floyd, John A List

Cited by*: 2 Downloads*: 49

The gold standard in the sciences is uncovering causal relationships. A growing literature in economics utilizes field experiments as a methodology to establish causality between variables. Taking lessons from the economics literature, this study provides an "A-to-Z" description of how to conduct field experiments in accounting and finance. We begin by providing a user's guide into what a field experiment is, what behavioral parameters field experiments identify, and how to efficiently generate and analyze experimental data. We then provide a discussion of extant field experiments that touch on important issues in accounting and finance, and we also review areas that have ample opportunities for future field experimental explorations. We conclude that the time is ripe for field experimentation to deepen our understanding of important issues in accounting and finance.

Ginger Z Jin, Andrew Kato

Cited by*: 2 Downloads*: 18

Every new method of trade offers an opportunity for economic agents to compare its costs and benefits relative to the status quo. Such comparison motivates sorting across market segments and reshapes the whole marketplace. The Internet provides an excellent example: it introduces substantial search cost savings over brick and mortar retail stores but imposes new obstacles for sellers to convey quality. Using sports card trading as a case study, we provide empirical evidence on (1) the sorting of product quality between the online and offline segments, (2) the changes for retail outlets after the Internet came into place, and (3) how supporting industries such as professional grading and card manufacturing adapted to take advantage of the new market.

David Laibson , John A List

Cited by*: 2 Downloads*: 114

There are many great ways to incorporate behavioral economics in a first-year undergraduate economics class-i.e., the course that is typically called "Principles of Economics." Our preferred approach integrates behavioral economics throughout the course (e.g., see Acemoglu, Laibson, and List 2015). With the integrated approach, behavioral content plays a role in many of the chapters of the principles of economics curriculum, including chapters on optimization, equilibrium, game theory, intertemporal choice, probability and risk, social preferences, household finance, the labor market, financial intermediation, monetary policy, economic fluctuations, and financial crises. We prefer the integrated approach because it enables the behavioral insights to show up where they are conceptually most relevant. By illustration, it is best to combine a discussion of downward nominal wage rigidity (i.e., the idea that workers strongly resist nominal wage declines) with the overall discussion of the labor market. Whether or not an instructor integrates behavioral economics throughout the principles of economics course, it makes sense to pull central materials together and dedicate a lecture (or more) to a focused discussion of behavioral economics. This note describes our approach to such a lecture, emphasizing six key principles of behavioral economics. Our choice of content for a behavioral lecture is motivated by three factors. First, we include ideas that are conceptually important. Second, we include material that is practically important and personally relevant to our students-we have found that such content resonates long after the course ends. Third, we include content that relates to what has been (or will be) taught in the rest of the course, and therefore serves as a complement. We want students to see that behavioral economics is an integrated part of economics, not a freak show that is isolated from "the standard ingredients" in the rest of the economics course. This paper summarizes our approach to such a focused behavioral lecture. In Section I, we define behavioral economics and place it in historical context. In Section II, we introduce six modular principles that can be used to teach behavioral economics. We provide PowerPoint notes on our home pages, which instructors should feel free to edit and use.

Santosh Anagol, Vimal Balasubramaniam, Tarun Ramadorai

Cited by*: 2 Downloads*: 24

Winners of randomly assigned initial public offering (IPO) lottery shares are significantly more likely to hold these shares than lottery losers 1, 6, and even 24 months after the random allocation. This effect persists in samples of wealthy and highly active investors, suggesting along with additional evidence that this type of "endowment effect" is not solely driven by portfolio inertia or wealth effects. The effect decreases as experience in the IPO market increases, but persists even for the most experienced investors. These results suggest that agents' preferences and/or beliefs about an asset are not independent of ownership, providing field evidence derived from the behavior of 1.5 million Indian stock investors which is in line with the large laboratory literature documenting endowment effects. We evaluate the extent to which prominent models of endowment effects and/or investor behavior can explain our results. A combination of inattention and non-standard preferences (realization utility) or non-standard beliefs (salience based probability distortions) appears most consistent with our findings.

Omar Al-Ubaydli, John A List

Cited by*: 2 Downloads*: 88

This is a review of the literature of field experimental studies of markets. The main results covered by the review are as follows: (1) Generally speaking, markets organize the efficient exchange of commodities; (2) There are some behavioral anomalies that impede efficient exchange; (3) Many behavioral anomalies disappear when traders are experienced.

Maurizio Bovi

Cited by*: 2 Downloads*: 29

To learn the people's expectations formation process, we examine shocks and survey expectations on individual and aggregate income. Data show that shocks have permanent effects on both expectations, which do not diverge systematically because agents revise forecasts. Actually, only expectations on GDP dynamics are revised. These latter overreact to shocks and are more volatile than expectations on personal stances. Disagreement is persistently high. Astonishingly, there is even less consensus when expectations deal with the same fundamental. Lastly, we elaborate a test on whether - and find evidence that - cross sectional disagreement and time series volatility in expectations are equal.

Omar Al-Ubaydli, John A List

Cited by*: 2 Downloads*: 1

Economists are increasingly turning to the experimental method as a means to estimate causal effects. By using randomization to identify key treatment effects, theories previously viewed as untestable are now scrutinized, efficacy of public policies are now more easily verified, and stakeholders can swiftly add empirical evidence to aid their decision-making. This study provides an overview of experimental methods in economics, with a special focus on developing an economic theory of generalizability. Given that field experiments are in their infancy, our secondary focus pertains to a discussion of the various parameters that they identify, and how they add to scientific knowledge. We conclude that until we conduct more field experiments that build a bridge between the lab and the naturally-occurring settings of interest we cannot begin to make strong conclusions empirically on the crucial question of generalizability from the lab to the field.

Michael Chirico, Robert Inman, Charles Loeffler, John MacDonald, Holger Sieg

Cited by*: 2 Downloads*: 67

Property taxes play a central role in the financing of municipal government services. Yet, municipal governments commonly confront problems with property tax collection even when the tax base is known. There is surprisingly little evidence on what authorities can do to increase property tax compliance. This paper analyzes seven different property tax notification strategies through a randomized controlled experiment conducted with the City of Philadelphia. All seven notification strategies increase property tax compliance over the usual approach of simply sending a bill. The most effective notifications are the those that threaten to take out a lien on the property or to foreclose by sheriff's sale for continued failure to pay taxes. The results suggest that economic motives to pay property taxes are more effective than those that appeal to social norms.

Joshua D Angrist, Eric Bettinger, Michael Kremer

Cited by*: 2 Downloads*: 20

Colombia's PACES program provided over 125,000 poor children with vouchers that covered half the cost of private secondary school. The vouchers were renewable annually conditional on adequate academic progress. Since many vouchers were assigned by lottery, program effects can reliably be assessed by comparing lottery winners and losers. Estimates using administrative records suggest the PACES program increased secondary school completion rates by 15-20 percent. Correcting for the greater percentage of lottery winners taking college admissions tests, the program increased test scores by two-tenths of a standard deviation in the distribution of potential test scores. Boys, who have lower scores than girls in this population, show larger test score gains, especially in math.

Paul Glewwe, Albert Park, Meng Zhao

Cited by*: 2 Downloads*: 19

About 10% of primary school students in developing countries have poor vision, yet in virtually all of these countries very few children wear glasses. There has been almost no research on the impact of poor vision on school performance in developing countries, and simple OLS estimates are likely to be biased because students who study more often are likely to develop poor vision faster. This paper presents results from a randomized trial in Western China that began in the summer of 2004. The trial involves over 19,000 students in 165 schools in two counties of Gansu province. The schools were randomly divided (at the township level) into 103 schools that received eyeglasses (for students in grades 4-6) and 62 schools that served as controls. The results indicate that, after one year, making eyeglasses available increased average test scores by 0.11 to 0.15 standard deviations (of the distribution of the test scores). For those students who accepted the glasses, average test scores increased by 0.15 to 0.22 standard deviations.

Dean S Karlan, Jonathan Zinman

Cited by*: 2 Downloads*: 20

Information asymmetries are important in theory but difficult to identify in practice. We estimate the empirical importance of adverse selection and moral hazard in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers issued by a major South African lender along three dimensions: 1) the initial "offer interest rate" appearing on direct mail solicitations; 2) a "contract interest rate" equal to or less than the offer interest rate and revealed to the over 4,000 borrowers who agreed to the initial offer rate; and 3) a dynamic repayment incentive that extends preferential pricing on future loans to borrowers who remain in good standing. These three randomizations, combined with complete knowledge of the Lender's information set, permit identification of specific types of private information problems. Specifically, our setup distinguishes adverse selection from moral hazard effects on repayment, and thereby generates unique evidence on the existence and magnitudes of specific credit market failures. We find evidence of both adverse selection (among women) and moral hazard (predominantly among men), and the findings suggest that about 20% of default is due to asymmetric information problems. This helps explain the prevalence of credit constraints even in a market that specializes in financing high-risk borrowers at very high rates.

Stephan Meier

Cited by*: 2 Downloads*: 20

Framing a decision situation differently has affected behavior substantially in previous studies. This paper tests a framing effect in a field experiment at the University of Zurich. Each semester, every student has to decide whether to contribute to two social funds. Students were randomly informed that a high percentage of the student population contributed (or, equivalently, that a low percentage did not contribute), while others received the information that a relatively low percentage contributed (or a high percentage did not contribute). The results show the influence of framing effects is limited. People behave in a conditional cooperative way if informed either about the number of contributors or about the equivalent number of non-contributors. The positive correlation between group behavior and individual behavior is, however, weaker when the focus is on the defectors. The field experiment also shows gender differences in social comparison.

Glenn W Harrison, John A List, Charles Towe

Cited by*: 1 Downloads*: 29

Does individual behavior in a laboratory setting provide a reliable indicator of behavior in a naturally occurring setting? We consider this general methodological question in the context of eliciting risk attitudes. The controls that are typically employed in laboratory settings, such as the use of abstract lotteries, could lead subjects to employ behavioral rules that differ from the ones they employ in the field. Because it is field behavior that we are interested in understanding, those controls might be a confound in themselves if they result in differences in behavior. We find that the use of artificial monetary prizes provides a reliable measure of risk attitudes when the natural counterpart outcome has minimal uncertainty, but that it can provide an unreliable measure when the natural counterpart outcome has background risk. Behavior tended to be moderately risk averse when artificial monetary prizes were used or when there was minimal uncertainty in the natural nonmonetary outcome, but subjects drawn from the same population were much more risk averse when their attitudes were elicited using the natural nonmonetary outcome that had some background risk. These results are consistent with conventional expected utility theory for the effects of background risk on attitudes to risk.