Private Paternalism, the Commitment Puzzle, and Model-Free Equilibrium
David Laibson
Paternalism is a policy that advances an individual's interests by restricting his or her freedom. In a setting with present-biased agents, I characterize the scope of private paternalism—paternalism implemented by private institutions. Private paternalism arises from two channels: (i) agents who seek commitment because they hold sophisticated beliefs about their present bias, and (ii) agents (naive or sophisticated) who use model-free forecasts to choose organizations that have a history of generating high experienced utility flows for their members (O'Donoghue and Rabin 1999b). When naive consumers are common, private paternalism will be shrouded, explaining why commitment mechanisms are typically shrouded in the labor market (the commitment puzzle). Private paternalism has greater traction when production occurs in the formal sector instead of the informal (household) sector, where monitors are not always present, able, or willing to implement socially efficient forcing mechanisms.
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Algorithmic Fairness
Jon Kleinberg, Jens Ludwig, Sendhil Mullainathan and Ashesh Rambachan
Concerns that algorithms may discriminate against certain groups have led to numerous efforts to 'blind' the algorithm to race. We argue that this intuitive perspective is misleading and may do harm. Our primary result is exceedingly simple, yet often overlooked. A preference for fairness should not change the choice of estimator. Equity preferences can change how the estimated prediction function is used (e.g., different threshold for different groups) but the function itself should not change. We show in an empirical example for college admissions that the inclusion of variables such as race can increase both equity and efficiency.
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Estimating Heterogeneous Consumer Preferences for Restaurants and Travel Time Using Mobile Location Data
Susan Athey, David Blei, Robert Donnelly, Francisco Ruiz and Tobias Schmidt
We estimate a model of consumer choices over restaurants using data from several thousand anonymous mobile phone users. Restaurants have latent characteristics (whose distribution may depend on restaurant observables) that affect consumers' mean utility as well as willingness to travel to the restaurant, while each user has distinct preferences for these latent characteristics. We analyze how consumers reallocate their demand after a restaurant closes to nearby restaurants versus more distant restaurants, comparing our predictions to actual outcomes. We also address counterfactual questions such as what type of restaurant would attract the most consumers in a given location.
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Estimating Economic Characteristics with Phone Data
Joshua E. Blumenstock
Historically, economists have relied heavily on survey-based data collection to measure social and economic well-being. Here, we investigate the extent to which the "digital footprints" of an individual can be used to infer his or her socioeconomic characteristics. Using two different datasets from Afghanistan and Rwanda, we show that phone data can be used to estimate the wealth of individuals in two very different economic environments. However, we find that such models are relatively brittle, and that a model trained in one country cannot be used to estimate characteristics in another. These results suggest several promising applications and directions for future work.
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Nowcasting Gentrification: Using Yelp Data to Quantify Neighborhood Change
Edward L. Glaeser, Hyunjin Kim and Michael Luca
Data from digital platforms have the potential to improve our understanding of gentrification, both by predicting gentrification and by characterizing the local economy of gentrifying neighborhoods. To explore, we identify gentrifying neighborhoods using government data, and then use Yelp data to analyze local business activity. We find that gentrifying neighborhoods tend to have growing numbers of local groceries, cafes, restaurants, and bars, with little evidence of crowd-out of other types of businesses. Moreover, local economic activity, as measured by Yelp data, is a leading indicator for housing price changes and can help to predict which neighborhoods are gentrifying.
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Can Information Change Personal Retirement Savings? Evidence from Social Security Benefits Statement Mailings
Susan Payne Carter and William Skimmyhorn
Despite concern about the viability of public retirement programs and potential undersaving for retirement, we still know little about the impact of government provided information on individual behavior. We exploit plausibly exogenous variation in exposure to the world's largest personalized retirement benefits statement from the US Social Security Administration to evaluate the effects of information and encouragement on individual retirement savings decisions. Using three natural experiments between 2011 and 2014 and administrative data, we find no impact of the statements on individual retirement savings in their employer provided retirement accounts.
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The Elephant Curve of Global Inequality and Growth |
Facundo Alvaredo, Lucas Chancel, Thomas Piketty, Emmanuel Saez and Gabriel Zucman |
We present new evidence on global inequality and growth since 1980 using the World and Wealth Income Database. We plot the curve of cumulated growth from 1980 to 2016 by percentile of the global distribution of income per adult. This curve has an elephant shape due to high growth rates at the median (fast growth in China and India), modest growth rates above the median, and explosive growth rates at the top. We project the evolution of global inequality between now and 2050 combining projected macro growth rates and within country inequality evolution based on past trends.
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Is Altruism Sensitive to Scope? The Role of Tangibility | Alex Imas and George Loewenstein | Prior work has shown that people appear insensitive to the scope of their altruistic acts and prosocial behavior. While they respond positively when their choices lead to increasing rewards for themselves, people do not change their behavior when the outcomes for others increase. We demonstrate that the scope sensitivity of altruism depends critically on its tangibility, and suggest that this relationship operates through mental accounting. We show that by increasing the level of tangibility, people can become just as sensitive to changes in the size of rewards for others as if they were earning the rewards themselves.
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Gender Norms and Relative Working Hours: Why Do Women Suffer More Than Men from Working Longer Hours Than Their Partners? | Sarah Fleche, Anthony Lepinteur and Nattavudh Powdthavee | Constraints that prevent women from working longer hours are argued to be important drivers of the gender wage gap in the United States. We provide evidence that in couples where the wife's working hours exceed the husband's, the wife reports lower life satisfaction. By contrast, there is no effect on the husband's satisfaction. The results still hold when controlling for relative income. We argue that these patterns are best explained by perceived fairness of the division of household labor, which induces an aversion to a situation where the wife works more at home and on the labor market.
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A Dialogue between a Populist and an Economist | Tito Boeri, Prachi Mishra, Chris Papageorgiou and Antonio Spilimbergo | In this imaginary dialogue, a populist and an economist discuss the role of economic shocks to explain populism. A simple correlation between economic shocks and populism is weak. However, economic shocks can explain well the phenomenon of populism in countries with low pre-existent level of trust. This is confirmed both at the macro cross-country level and also by micro evidence obtained from surveys. Finally, this finding is consistent with the "ideational approach" in political science, which emphasizes how the populist narrative opposes the "corrupt elite" to the "virtuous people."
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Is Populism Necessarily Bad Economics? | Dani Rodrik | I distinguish between political and economic populism. Both are averse to agencies of restraint, or, equivalently, delegation to technocrats or external rules. In the economic domain, delegation to independent agencies (domestic or foreign) occurs in two different contexts: (i) in order to prevent the majority from harming itself in the future and (ii) in order to cement a redistribution arising from a temporary political advantage for the longer-term. Economic policy restraints that arise in the first case are desirable; those that arise in the second case are much less so.
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Economic Drivers of Populism | Sergei Guriev | The recent wave of populism is different from the previous ones, thus generating the demand for noneconomic explanations, such as identity politics and cultural factors. In this paper, I discuss several pieces of evidence that show that economic factors, such as an increase in unemployment during the Great Recession, skill-biased trade and inequality (especially inequality of opportunity), have also played an important role in the recent rise of antiestablishment sentiment.
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On the Returns to Invention within Firms: Evidence from Finland | Philippe Aghion, Ufuk Akcigit, Ari Hyytinen and Otto Toivanen | In this paper we merge individual income data, firm-level data, patenting data, and IQ data in Finland over the period 1988–2012 to analyze the returns to invention for inventors and their coworkers or stakeholders within the same firm. We find that: (i) inventors collect only 8 percent of the total private return from invention; (ii) entrepreneurs get over 44 percent of the total gains; (iii) bluecollar workers get about 26 percent of the gains and the rest goes to white-collar workers. Moreover, entrepreneurs start with significant negative returns prior to the patent application, but their returns subsequently become highly positive.
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Mind The (Profit) Gap: Why Are Female Enterprise Owners Earning Less Than Men? | Morgan Hardy and Gisella Kagy | We explore potential causes for the well-documented profit gap between male- and female-owned microenterprises in low-income countries. We use rich data from an ongoing field project in Ghana's garment making sector, and our study sample consists of all garment making firms in a midsize district capital. Even within the same industry, male-owned firms earn nearly twice as much profit as female-owned firms. Furthermore, we find the large and persistent gender difference in profits cannot be explained by our extensive firm- and owner-level characteristics. We conclude that factors outside of individual firm or firm-owner characteristics are likely to be at play.
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From "Traditional" to Research-Based Instructional Strategies: An Assessment of Learning Gains | Sarah B. Cosgrove and Neal H. Olitsky | The cognitive science literature provides several research based instructional strategies (RBIS) proven to be effective in student learning. Given the prevalence of lecture-based classes and instructor-led discussions, understanding the effects of switching from the "traditional" method to employing RBIS would provide a better understanding of the value of these strategies. In this paper, we conduct a controlled experiment comparing a "traditional," lecture-based class to a class in which these RBIS are carefully employed. Students exposed to the refined RBIS approach show significantly higher gains in learning of approximately 15 percentage points when compared to students in a traditional class.
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What Matters for the Productivity of Kidney Exchange? | Nikhil Agarwal, Itai Ashlagi, Eduardo Azevedo, Clayton Featherstone and Ömer Karaduman | Kidney exchange platforms serve patients who need a kidney transplant and who have a willing, but incompatible, donor. These platforms match patients and donors to produce transplants. This paper documents operational details of the three largest platforms in the United States. It then uses the framework developed in Agarwal et al. (2017) to examine how practical details influence platform productivity. The results show that reducing frictions in accepting proposed matches, frequent matching, and encouraging altruistic donors are important ways in which a platform can increase its productivity.
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Cousin Marriage Is Not Choice: Muslim Marriage and Underdevelopment | Lena Edlund | According to classical Muslim marriage law, a woman needs her guardian's (viz. father's) consent to marry. However, the resulting marriage payment, the mahr, is hers. This split bill may lie behind the high rates of consanguineous marriage in the Muslim world, where country estimates range from 20 to 60 percent. Cousin marriage can stem from a form of barter in which fathers contribute daughters to an extended family bridal pool against sons' right to draw from the same pool. In the resulting system, women are robbed of their mahr and sons marry by guarding their sisters' "honor" heeding clan elders.
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Gender Peer Effects in a Predominantly Male Environment: Evidence from West Point | Nick Huntington-Klein and Elaina Rose | There is considerable interest in the success of women in overwhelmingly male environments. One hypothesized determinant of success is the increased presence of other women. However, the theoretical direction of this effect is uncertain. Previous studies of heavily male contexts have had mixed results. We take advantage of random peer group assignment at West Point military academy to identify gender peer effects in the first years in which women were admitted. We find that women do significantly better when placed in companies with more women peers. The addition of one woman peer reduces the gender progression gap by half.
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The Price of Labor: Evaluating the Impact of Eliminating User Fees on Maternal and Infant Health Outcomes | Anne Fitzpatrick | Since 2001, several sub-Saharan African countries have eliminated user fees for childbirth. Although intended to improve maternal and infant health outcomes, service quality also fell as facilities became overburdened. In this paper I combine DHS surveys on births from countries eliminating user fees. I identify the effect of user fee elimination using (i) a maternal fixed effect and (ii) an event study within a small geographic area. I find that user fees increase the likelihood of delivery at public sector facilities by 2–7 percentage points. I also find that user fee elimination reduces maternal mortality but may increase neonatal mortality.
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Ownership, Concentration, and Investment | Germán Gutiérrez and Thomas Philippon | The US business sector has underinvested relative to profits, funding costs, and Tobin's Q since the early 2000s. Building on prior work, we argue that decreasing competition, rising intangibles, and tightening governance explain, respectively, about one-half, one-third, and one-sixth of the investment gap. In particular, quasi-indexer ownership appears to lower investment, and this effect is stronger in noncompetitive industries.
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