There is an extensive critical literature analyzing the libertarian paternalism (LP) of Richard Thaler and Cass Sunstein. This paper is critical as well, but does so from a different perspective than most of the existing research. Thaler and Sunstein characterize LP by at least two key features: i) a sharp distinction between Econs (those whose behavior will be unchanged by LP policies) and Humans (who will, at least potentially, change their behavior as a result of LP policies), and ii) defining Econs explicitly as homo economicus: "the textbook picture of human beings offered by economists" (Thaler and Sunstein, 2009, p. 7). This paper will take their definition of Econs seriously and examine the implications for LP-based policies. The bottom line is that if we take Econs seriously, LP nudges end up being not only extremely weak policy tools, but they also fail to accommodate some of the most important insights of behavioral economics.
{"title":"Libertarian Paternalism: Taking Econs Seriously","authors":"D. Wade Hands","doi":"10.2139/ssrn.3267724","DOIUrl":"https://doi.org/10.2139/ssrn.3267724","url":null,"abstract":"There is an extensive critical literature analyzing the libertarian paternalism (LP) of Richard Thaler and Cass Sunstein. This paper is critical as well, but does so from a different perspective than most of the existing research. Thaler and Sunstein characterize LP by at least two key features: i) a sharp distinction between Econs (those whose behavior will be unchanged by LP policies) and Humans (who will, at least potentially, change their behavior as a result of LP policies), and ii) defining Econs explicitly as homo economicus: \"the textbook picture of human beings offered by economists\" (Thaler and Sunstein, 2009, p. 7). This paper will take their definition of Econs seriously and examine the implications for LP-based policies. The bottom line is that if we take Econs seriously, LP nudges end up being not only extremely weak policy tools, but they also fail to accommodate some of the most important insights of behavioral economics.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129328106","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Quantity discounts are an effective way for households to save money. I explore how large these quantity discounts are, how bulk buying differs by income, and how other factors affect the bulk buying decision. Using Nielsen’s granular store- and household-level data, I establish two empirical facts. First, quantity discounts are large for a wide range of products. Second, low-income households are less likely to buy in bulk than high-income households. I estimate that low-income households could reduce their grocery expenditures by 5%, saving an aggregate of $5.4 billion annually, if they bought in bulk to the same extent as high-income households. I augment Nielsen data with new data that I collected on state-level unit-price regulations and on warehouse club entry. I find that a combination of cognitive costs, store preferences, budget constraints,and storage costs discourage low-income households from realizing these savings. I then estimate a discrete choice model of household purchasing behavior to quantify how bulk buying changes when cognitive costs and storage costs are reduced. Counterfactual simulations show that mandating the display of unit prices, which has only been adopted by nine states, would reduce the difference in how often the highest- and lowest-income households buy in bulk by 26%.
{"title":"Less is More Expensive: Income Differences in Bulk Buying","authors":"Mallick Hossain","doi":"10.2139/ssrn.3472425","DOIUrl":"https://doi.org/10.2139/ssrn.3472425","url":null,"abstract":"Quantity discounts are an effective way for households to save money. I explore how large these quantity discounts are, how bulk buying differs by income, and how other factors affect the bulk buying decision. Using Nielsen’s granular store- and household-level data, I establish two empirical facts. First, quantity discounts are large for a wide range of products. Second, low-income households are less likely to buy in bulk than high-income households. I estimate that low-income households could reduce their grocery expenditures by 5%, saving an aggregate of $5.4 billion annually, if they bought in bulk to the same extent as high-income households. I augment Nielsen data with new data that I collected on state-level unit-price regulations and on warehouse club entry. I find that a combination of cognitive costs, store preferences, budget constraints,and storage costs discourage low-income households from realizing these savings. I then estimate a discrete choice model of household purchasing behavior to quantify how bulk buying changes when cognitive costs and storage costs are reduced. Counterfactual simulations show that mandating the display of unit prices, which has only been adopted by nine states, would reduce the difference in how often the highest- and lowest-income households buy in bulk by 26%.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"83 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116468641","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Surplus del Consumatore e del Produttore (Consumer and Producer Surplus)","authors":"Maria-Augusta Miceli","doi":"10.2139/ssrn.3521628","DOIUrl":"https://doi.org/10.2139/ssrn.3521628","url":null,"abstract":"<b>Italian abstract:</b> Derivazione del surplus del consumatore e del produttore in contesto di variabili continue e discrete.<br><br><b>English abstract:</b> Derivation of consumer and producer surplus in the continuous and discrete case.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116799996","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines whether relative income and income inequality within reference groups affect household consumption. Using the explanations of consumption behavior based on Dusenberry's relative income hypothesis, we test if household consumption levels in Turkey are affected by the household's relative position and inequality in the reference group between 2005-12 by employing cross-sectional household-level data. We find that household consumption is negatively related to the relative income indicator after controlling for absolute income, and positively related to the income inequality of the reference group, as the literature suggests. The paper also shows that household indebtedness has a positive impact on household consumption when inequality in the reference group and the relative position of households are controlled for. We confirm that the results are not sensitive to chosen relative income indicators and income inequality.
{"title":"Household Consumption, Household Indebtedness, and Inequality in Turkey: A Microeconometric Analysis","authors":"Ö. Albayrak","doi":"10.2139/ssrn.3589407","DOIUrl":"https://doi.org/10.2139/ssrn.3589407","url":null,"abstract":"This paper examines whether relative income and income inequality within reference groups affect household consumption. Using the explanations of consumption behavior based on Dusenberry's relative income hypothesis, we test if household consumption levels in Turkey are affected by the household's relative position and inequality in the reference group between 2005-12 by employing cross-sectional household-level data. We find that household consumption is negatively related to the relative income indicator after controlling for absolute income, and positively related to the income inequality of the reference group, as the literature suggests. The paper also shows that household indebtedness has a positive impact on household consumption when inequality in the reference group and the relative position of households are controlled for. We confirm that the results are not sensitive to chosen relative income indicators and income inequality.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122174468","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A. K. Bartscher, M. Kuhn, M. Schularick, Ulrike I. Steins
This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. household debt between the 1970s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.
{"title":"Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016","authors":"A. K. Bartscher, M. Kuhn, M. Schularick, Ulrike I. Steins","doi":"10.2139/ssrn.3601951","DOIUrl":"https://doi.org/10.2139/ssrn.3601951","url":null,"abstract":"This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. household debt between the 1970s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122052428","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study contributes to the vast empirical literature on the interplay between income inequality and economic growth in two fronts. First, by using data from the World Inequality Database, potential cross-country heterogeneity, which is concealed in studies that use panel data, is addressed. Second, by adopting a flexible autoregressive distributed lag model, the growth of per capita GDP is allowed to have asymmetric responses to rising and falling top income shares. The analysis covers six countries over the period 1950-2010: Australia, Canada, France, India, Japan and the United States. In France and the United States, falling income shares of the highest-earning percentile were associated with lower subsequent economic growth. In India, growth was positively associated with a rising top income share. Thus, evidence is found for both cross-country heterogeneity and asymmetries. Adjustment processes to changes in inequality took place quickly in all countries suggesting that the empirical approach captures relatively direct economic mechanisms rather than slow-moving transmission channels. Furthermore, up-to-date data on the top income shares are used to briefly revisit previously used panel estimation techniques.
{"title":"Income Inequality and Economic Growth: Is There a Difference between Rising and Falling Top Income Shares?","authors":"Toni Juuti","doi":"10.2139/ssrn.3575643","DOIUrl":"https://doi.org/10.2139/ssrn.3575643","url":null,"abstract":"This study contributes to the vast empirical literature on the interplay between income inequality and economic growth in two fronts. First, by using data from the World Inequality Database, potential cross-country heterogeneity, which is concealed in studies that use panel data, is addressed. Second, by adopting a flexible autoregressive distributed lag model, the growth of per capita GDP is allowed to have asymmetric responses to rising and falling top income shares. The analysis covers six countries over the period 1950-2010: Australia, Canada, France, India, Japan and the United States. In France and the United States, falling income shares of the highest-earning percentile were associated with lower subsequent economic growth. In India, growth was positively associated with a rising top income share. Thus, evidence is found for both cross-country heterogeneity and asymmetries. Adjustment processes to changes in inequality took place quickly in all countries suggesting that the empirical approach captures relatively direct economic mechanisms rather than slow-moving transmission channels. Furthermore, up-to-date data on the top income shares are used to briefly revisit previously used panel estimation techniques.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"141 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123277417","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study a model that characterizes the conditions under which past misbehavior becomes the subject of present scandal, with consequences for both the implicated politician and the parties that work with him. In the model, both authentic and fake scandals arise endogenously within a political framework involving two parties that trade off benefits of continued collaboration with a suspect politician against the possibility of reputational fallout. Rising polarization between the two parties, we show, increases the likelihood of scandal while decreasing its informational value. Scandals that are triggered by only the opposing party, we also find, are reputationally damaging to both parties and, in some instances, reputationally enhancing to the politician. The model also reveals that jurisdictions with lots of scandals are not necessarily beset by more misbehavior. Under well-defined conditions, in fact, scandals can be a sign of political piety.
{"title":"Political Scandal: A Theory","authors":"Wioletta Dziuda, William G. Howell","doi":"10.2139/ssrn.3555120","DOIUrl":"https://doi.org/10.2139/ssrn.3555120","url":null,"abstract":"We study a model that characterizes the conditions under which past misbehavior becomes the subject of present scandal, with consequences for both the implicated politician and the parties that work with him. In the model, both authentic and fake scandals arise endogenously within a political framework involving two parties that trade off benefits of continued collaboration with a suspect politician against the possibility of reputational fallout. Rising polarization between the two parties, we show, increases the likelihood of scandal while decreasing its informational value. Scandals that are triggered by only the opposing party, we also find, are reputationally damaging to both parties and, in some instances, reputationally enhancing to the politician. The model also reveals that jurisdictions with lots of scandals are not necessarily beset by more misbehavior. Under well-defined conditions, in fact, scandals can be a sign of political piety.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129792262","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Shared values are deemed necessary as a solid foundation for social cohesion by commentators and observers in many countries. However, when examining what kind of values this is based on, answers often come down to platitudes and national clichés. This discussion paper offers some clarification through both a theoretical explication and an empirical exploration concerning the general role of values for social cohesion.
Values are notions about desirable, trans-situational end-states and behaviors. They fall into two categories, individual and societal values. We provide a critical discussion of the most prominent conceptualizations and their operationalization in the social sciences.
Values affect social cohesion in three possible pathways: First, when they are shared; second, when they promote behavior per se conducive to social cohesion and third, through their effect on policy choice and institutional design. We review evidence provided by the research literature for each of these pathways.
We further explore the third pathway by deriving from the research literature the conjecture that a cultural value emphasis on egalitarianism makes a universalistic scope of welfare institutions more likely, which in turn increases social and political trust. We first examine this conjecture with a series of regression models, and then run a mediation analysis. The results show that
(1.) egalitarian values are moderately strongly and positively linked to universalistic welfare institutions, but that
(2.) welfare institutions mediate the association of egalitarian values with social trust only to a small extent and that
(3.) more universalistic welfare institutions counteract a negative association between egalitarian values and institutional trust.
{"title":"The Role of Values for Social Cohesion: Theoretical Explication and Empirical Exploration","authors":"D. Nowack, Sophia Schoderer","doi":"10.2139/ssrn.3553340","DOIUrl":"https://doi.org/10.2139/ssrn.3553340","url":null,"abstract":"Shared values are deemed necessary as a solid foundation for social cohesion by commentators and observers in many countries. However, when examining what kind of values this is based on, answers often come down to platitudes and national clichés. This discussion paper offers some clarification through both a theoretical explication and an empirical exploration concerning the general role of values for social cohesion.<br><br>Values are notions about desirable, trans-situational end-states and behaviors. They fall into two categories, individual and societal values. We provide a critical discussion of the most prominent conceptualizations and their operationalization in the social sciences.<br><br>Values affect social cohesion in three possible pathways: First, when they are shared; second, when they promote behavior per se conducive to social cohesion and third, through their effect on policy choice and institutional design. We review evidence provided by the research literature for each of these pathways.<br><br>We further explore the third pathway by deriving from the research literature the conjecture that a cultural value emphasis on egalitarianism makes a universalistic scope of welfare institutions more likely, which in turn increases social and political trust. We first examine this conjecture with a series of regression models, and then run a mediation analysis. The results show that <br><br>(1.) egalitarian values are moderately strongly and positively linked to universalistic welfare institutions, but that <br><br>(2.) welfare institutions mediate the association of egalitarian values with social trust only to a small extent and that <br><br>(3.) more universalistic welfare institutions counteract a negative association between egalitarian values and institutional trust.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129647050","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We study stochastic choice from lists. All lists present the same set of alternatives albeit in different orders. Faced with a list , the decision maker makes her choice in two stages. In the first stage she searches through the list till she sees k alternatives. In the second stage she chooses from the alternatives she has seen. Both k and the choice rule governing her second stage behavior are random. We show that the underlying primitives of our model are revealed by the decision maker’s choice frequencies from lists. We characterize the model and two of its special cases. In the first special case the decision maker deterministically chooses the best observed alternative according to a given preference. In the second, the decision maker maximizes random preferences.
{"title":"A Model of Stochastic Choice From Lists","authors":"Y. Ishii, Matthew Kovach, Levent Ülkü","doi":"10.2139/ssrn.3586922","DOIUrl":"https://doi.org/10.2139/ssrn.3586922","url":null,"abstract":"Abstract We study stochastic choice from lists. All lists present the same set of alternatives albeit in different orders. Faced with a list , the decision maker makes her choice in two stages. In the first stage she searches through the list till she sees k alternatives. In the second stage she chooses from the alternatives she has seen. Both k and the choice rule governing her second stage behavior are random. We show that the underlying primitives of our model are revealed by the decision maker’s choice frequencies from lists. We characterize the model and two of its special cases. In the first special case the decision maker deterministically chooses the best observed alternative according to a given preference. In the second, the decision maker maximizes random preferences.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132625263","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The efficiency of resource allocation is often analyzed in static frameworks with a focus on the cross-sectional heterogeneity in the willingness to pay among users. When the resource is durable in nature, the temporal heterogeneity could be important in assessing the efficiency properties of different allocation mechanisms. This paper uses a dynamic model to empirically quantify the efficiency outcome of using lotteries to allocate scarce resources among forward-looking consumers. In the context of the lottery policy for vehicle licenses in Beijing, our analysis shows that lotteries significantly affect intertemporal decisions in that households participate in lotteries at least four years earlier on average than they would be in a counterfactual environment of no quantity constraint. The welfare loss due to temporal heterogeneity and resulting changes in participation decisions accounts for over half of the total welfare loss from the lottery policy. The analysis highlights the importance of taking dynamic efficiency into account in designing resource allocation mechanisms.
{"title":"The Dynamic Efficiency in Resource Allocation: Evidence from Vehicle License Lotteries in Beijing","authors":"Youming Liu, Shanjun Li, Caixia Shen","doi":"10.2139/ssrn.3547563","DOIUrl":"https://doi.org/10.2139/ssrn.3547563","url":null,"abstract":"The efficiency of resource allocation is often analyzed in static frameworks with a focus on the cross-sectional heterogeneity in the willingness to pay among users. When the resource is durable in nature, the temporal heterogeneity could be important in assessing the efficiency properties of different allocation mechanisms. This paper uses a dynamic model to empirically quantify the efficiency outcome of using lotteries to allocate scarce resources among forward-looking consumers. In the context of the lottery policy for vehicle licenses in Beijing, our analysis shows that lotteries significantly affect intertemporal decisions in that households participate in lotteries at least four years earlier on average than they would be in a counterfactual environment of no quantity constraint. The welfare loss due to temporal heterogeneity and resulting changes in participation decisions accounts for over half of the total welfare loss from the lottery policy. The analysis highlights the importance of taking dynamic efficiency into account in designing resource allocation mechanisms.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123234510","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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