Bargaining over real prices with microenterprise owners in Ghana, we show that sellers with less per capita household liquidity agree to lower sale prices. This relationship is robust across firms and within firms over time, even after controlling for a plethora of time-varying observables. A computerized bargaining experiment, with randomized initial payout sizes, corroborates the real-bargaining findings. This pattern can be explained by an application of classical bargaining theory that includes endowments and utility functions with decreasing absolute risk aversion. The potential poverty-multiplying implications of pricing behavior is a key frontier in understanding barriers to the profitability of microenterprises. (JEL D22, G51, L25, L26, O12, O14)
{"title":"Gotta Have Money to Make Money? Bargaining Behavior and Financial Need of Microentrepreneurs","authors":"Morgan Hardy, G. Kagy, L. Song","doi":"10.1257/aeri.20200723","DOIUrl":"https://doi.org/10.1257/aeri.20200723","url":null,"abstract":"Bargaining over real prices with microenterprise owners in Ghana, we show that sellers with less per capita household liquidity agree to lower sale prices. This relationship is robust across firms and within firms over time, even after controlling for a plethora of time-varying observables. A computerized bargaining experiment, with randomized initial payout sizes, corroborates the real-bargaining findings. This pattern can be explained by an application of classical bargaining theory that includes endowments and utility functions with decreasing absolute risk aversion. The potential poverty-multiplying implications of pricing behavior is a key frontier in understanding barriers to the profitability of microenterprises. (JEL D22, G51, L25, L26, O12, O14)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47868595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manipulating subjects’ expectations about the resolution of uncertainty, I show that subjects update beliefs about ego-relevant information optimistically when they expect no resolution of uncertainty but neutrally when they expect immediate uncertainty resolution. This finding highlights an important channel of the supply side of motivated beliefs and informs the discussion about the puzzling evidence on belief updating about ego-relevant information. Moreover, I document that subjects ex post rationalize information by manipulating their stated beliefs about the ego-relevance of the underlying event depending on the valence of information. This result suggests an additional channel that subjects use to protect their ego utility. (JEL D81, D83, D84)
{"title":"Motivated Beliefs and Anticipation of Uncertainty Resolution","authors":"Christoph Drobner","doi":"10.1257/aeri.20200829","DOIUrl":"https://doi.org/10.1257/aeri.20200829","url":null,"abstract":"Manipulating subjects’ expectations about the resolution of uncertainty, I show that subjects update beliefs about ego-relevant information optimistically when they expect no resolution of uncertainty but neutrally when they expect immediate uncertainty resolution. This finding highlights an important channel of the supply side of motivated beliefs and informs the discussion about the puzzling evidence on belief updating about ego-relevant information. Moreover, I document that subjects ex post rationalize information by manipulating their stated beliefs about the ego-relevance of the underlying event depending on the valence of information. This result suggests an additional channel that subjects use to protect their ego utility. (JEL D81, D83, D84)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44058153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Ameriks, Andrew Caplin, Minjoon Lee, M. Shapiro, Christopher Tonetti
Cognitive decline may lead older Americans to make poor financial decisions. Preventing poor decisions may require timely transfer of financial control to a reliable agent. Cognitive decline, however, can develop unnoticed, creating the possibility of suboptimal timing of the transfer of control. This paper presents survey-based evidence that older Americans with significant wealth regard suboptimal timing of the transfer of control, in particular delay due to unnoticed cognitive decline, as a substantial risk to financial well-being. This paper provides a theoretical framework to model such a lack of awareness and the resulting welfare loss. (JEL G51, G53, H55, J14, J26, J32)
{"title":"Cognitive Decline, Limited Awareness, Imperfect Agency, and Financial Well-being","authors":"J. Ameriks, Andrew Caplin, Minjoon Lee, M. Shapiro, Christopher Tonetti","doi":"10.3386/w29634","DOIUrl":"https://doi.org/10.3386/w29634","url":null,"abstract":"Cognitive decline may lead older Americans to make poor financial decisions. Preventing poor decisions may require timely transfer of financial control to a reliable agent. Cognitive decline, however, can develop unnoticed, creating the possibility of suboptimal timing of the transfer of control. This paper presents survey-based evidence that older Americans with significant wealth regard suboptimal timing of the transfer of control, in particular delay due to unnoticed cognitive decline, as a substantial risk to financial well-being. This paper provides a theoretical framework to model such a lack of awareness and the resulting welfare loss. (JEL G51, G53, H55, J14, J26, J32)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48677064","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Beliefs and decisions are often based on confronting models with data. What is the largest “fake” correlation that a misspecified model can generate, even when it passes an elementary misspecification test? We study an “analyst” who fits a model, represented by a directed acyclic graph, to an objective (multivariate) Gaussian distribution. We characterize the maximal estimated pairwise correlation for generic Gaussian objective distributions, subject to the constraint that the estimated model preserves the marginal distribution of any individual variable. As the number of model variables grows, the estimated correlation can become arbitrarily close to one regardless of the objective correlation. (JEL D83, C13, C46, C51)
{"title":"Cheating with Models","authors":"K. Eliaz, R. Spiegler, Y. Weiss","doi":"10.1257/aeri.20200635","DOIUrl":"https://doi.org/10.1257/aeri.20200635","url":null,"abstract":"Beliefs and decisions are often based on confronting models with data. What is the largest “fake” correlation that a misspecified model can generate, even when it passes an elementary misspecification test? We study an “analyst” who fits a model, represented by a directed acyclic graph, to an objective (multivariate) Gaussian distribution. We characterize the maximal estimated pairwise correlation for generic Gaussian objective distributions, subject to the constraint that the estimated model preserves the marginal distribution of any individual variable. As the number of model variables grows, the estimated correlation can become arbitrarily close to one regardless of the objective correlation. (JEL D83, C13, C46, C51)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43759103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
D. Acemoglu, V. Chernozhukov, I. Werning, M. Whinston
We study targeted lockdowns in a multigroup SIR model where infection, hospitalization, and fatality rates vary between groups—in particular between the “young,” the “middle-aged,” and the “old.” Our model enables a tractable quantitative analysis of optimal policy. For baseline parameter values for the COVID-19 pandemic applied to the US, we find that optimal policies differentially targeting risk/age groups significantly outperform optimal uniform policies and most of the gains can be realized by having stricter protective measures such as lockdowns on the more vulnerable, old group. Intuitively, a strict and long lockdown for the old both reduces infections and enables less strict lockdowns for the lower-risk groups. (JEL H51, I12, I18, J13, J14)
{"title":"Optimal Targeted Lockdowns in a Multigroup SIR Model","authors":"D. Acemoglu, V. Chernozhukov, I. Werning, M. Whinston","doi":"10.1257/aeri.20200590","DOIUrl":"https://doi.org/10.1257/aeri.20200590","url":null,"abstract":"We study targeted lockdowns in a multigroup SIR model where infection, hospitalization, and fatality rates vary between groups—in particular between the “young,” the “middle-aged,” and the “old.” Our model enables a tractable quantitative analysis of optimal policy. For baseline parameter values for the COVID-19 pandemic applied to the US, we find that optimal policies differentially targeting risk/age groups significantly outperform optimal uniform policies and most of the gains can be realized by having stricter protective measures such as lockdowns on the more vulnerable, old group. Intuitively, a strict and long lockdown for the old both reduces infections and enables less strict lockdowns for the lower-risk groups. (JEL H51, I12, I18, J13, J14)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46127526","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Andrew Bacher-Hicks, J. Goodman, J. Green, Melissa K. Holt
One-fifth of US high school students report being bullied each year. We use internet search data for real-time tracking of bullying patterns as COVID-19 disrupted in-person schooling. We first show that pre-pandemic internet searches contain useful information about actual bullying behavior. We then show that searches for school bullying and cyberbullying dropped 30–35 percent as schools shifted to remote learning in spring 2020. The gradual return to in-person instruction starting in fall 2020 partially returned bullying searches to pre-pandemic levels. This rare positive effect may partly explain recent mixed evidence on the pandemic’s impact on students’ mental health and well-being. (JEL H75, I12, I21, I28, I31)
{"title":"The COVID-19 Pandemic Disrupted Both School Bullying and Cyberbullying","authors":"Andrew Bacher-Hicks, J. Goodman, J. Green, Melissa K. Holt","doi":"10.3386/w29590","DOIUrl":"https://doi.org/10.3386/w29590","url":null,"abstract":"One-fifth of US high school students report being bullied each year. We use internet search data for real-time tracking of bullying patterns as COVID-19 disrupted in-person schooling. We first show that pre-pandemic internet searches contain useful information about actual bullying behavior. We then show that searches for school bullying and cyberbullying dropped 30–35 percent as schools shifted to remote learning in spring 2020. The gradual return to in-person instruction starting in fall 2020 partially returned bullying searches to pre-pandemic levels. This rare positive effect may partly explain recent mixed evidence on the pandemic’s impact on students’ mental health and well-being. (JEL H75, I12, I21, I28, I31)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49488020","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Amy N. Finkelstein, Petra Persson, M. Polyakova, Jesse Shapiro
We use administrative data from Sweden to study adherence to 63 medication-related guidelines. We compare the adherence of patients without personal access to medical expertise to that of patients with access, namely doctors and their close relatives. We estimate that observably similar patients with access to expertise have 3.8 percentage points lower adherence, relative to a baseline adherence rate of 54.4 percent among those without access. Our findings suggest an important role in nonadherence for factors other than those, such as ignorance, poor communication, and complexity, that would be expected to diminish with access to expertise.(JEL D82, D83, I11, I12, I18)
{"title":"A Taste of Their Own Medicine: Guideline Adherence and Access to Expertise","authors":"Amy N. Finkelstein, Petra Persson, M. Polyakova, Jesse Shapiro","doi":"10.3386/w29356","DOIUrl":"https://doi.org/10.3386/w29356","url":null,"abstract":"We use administrative data from Sweden to study adherence to 63 medication-related guidelines. We compare the adherence of patients without personal access to medical expertise to that of patients with access, namely doctors and their close relatives. We estimate that observably similar patients with access to expertise have 3.8 percentage points lower adherence, relative to a baseline adherence rate of 54.4 percent among those without access. Our findings suggest an important role in nonadherence for factors other than those, such as ignorance, poor communication, and complexity, that would be expected to diminish with access to expertise.(JEL D82, D83, I11, I12, I18)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48652799","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates the feasibility of wealth taxation in developing countries. It uses rich administrative data from Colombia and leverages a government-designed program for voluntary disclosures of hidden wealth as well as the threat of detection triggered by the Panama Papers leak. There are two key findings. First, there is substantial (primarily offshore) evasion: two-fifths of the wealthiest 0.01 percent evade taxes, with these evaders concealing one-third of their wealth offshore. Second, strengthening enforcement can have a significant impact on wealth tax compliance, tax revenue, and progressivity. These results highlight both challenges and opportunities for wealth taxation in the developing world. (JEL D31, G51, H24, H26, K34, O15)
{"title":"Enforcing Wealth Taxes in the Developing World: Quasi-Experimental Evidence from Colombia","authors":"Juliana Londoño-Vélez, Javier Avila-Mahecha","doi":"10.1257/AERI.20200319","DOIUrl":"https://doi.org/10.1257/AERI.20200319","url":null,"abstract":"This paper investigates the feasibility of wealth taxation in developing countries. It uses rich administrative data from Colombia and leverages a government-designed program for voluntary disclosures of hidden wealth as well as the threat of detection triggered by the Panama Papers leak. There are two key findings. First, there is substantial (primarily offshore) evasion: two-fifths of the wealthiest 0.01 percent evade taxes, with these evaders concealing one-third of their wealth offshore. Second, strengthening enforcement can have a significant impact on wealth tax compliance, tax revenue, and progressivity. These results highlight both challenges and opportunities for wealth taxation in the developing world. (JEL D31, G51, H24, H26, K34, O15)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":"1 1","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41471328","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Firms in tradable sectors are more likely to be subject to external competition to limit market power, while nontradable firms are more dependent on domestic policies and institutions. This paper combines an antitrust index available for multiple countries with firm-level data from Orbis covering more than 12 million firms from 94 countries, including 20 sectors over 10 years and finds that profit margins of firms operating in nontradable sectors are significantly lower in countries with stronger antitrust policies compared to firms operating in tradable sectors. The results are robust to a wide variety of empirical specifications. (JEL D22, E02, L44)
{"title":"Antitrust Policies and Profitability in Nontradable Sectors","authors":"T. Besley, N. Fontana, Nicola Limodio","doi":"10.1257/AERI.20200316","DOIUrl":"https://doi.org/10.1257/AERI.20200316","url":null,"abstract":"Firms in tradable sectors are more likely to be subject to external competition to limit market power, while nontradable firms are more dependent on domestic policies and institutions. This paper combines an antitrust index available for multiple countries with firm-level data from Orbis covering more than 12 million firms from 94 countries, including 20 sectors over 10 years and finds that profit margins of firms operating in nontradable sectors are significantly lower in countries with stronger antitrust policies compared to firms operating in tradable sectors. The results are robust to a wide variety of empirical specifications. (JEL D22, E02, L44)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48694511","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Leonardo Bursztyn, Davide Cantoni, David Y. Yang, Noam Yuchtman, Y. J. Zhang, Dan Berkowitz, Raymond Han, Moritz Leitner, Jackson Li, Glen Ng, Aakaash Rao, Vanessa Sticher, Meggy Wan
We study the causes of sustained participation in political movements. To identify the persistent effect of protest participation, we randomly indirectly incentivize Hong Kong university students into participation in an antiauthoritarian protest. To identify the role of social networks, we randomize this treatment’s intensity across major-cohort cells. We find that incentives to attend one protest within a political movement increase subsequent protest attendance but only when a sufficient fraction of an individual’s social network is also incentivized to attend the initial protest. One-time mobilization shocks have dynamic consequences, with mobilization at the social network level important for sustained political engagement. (JEL D72, D74, I23, Z13)
{"title":"Persistent Political Engagement: Social Interactions and the Dynamics of Protest Movements","authors":"Leonardo Bursztyn, Davide Cantoni, David Y. Yang, Noam Yuchtman, Y. J. Zhang, Dan Berkowitz, Raymond Han, Moritz Leitner, Jackson Li, Glen Ng, Aakaash Rao, Vanessa Sticher, Meggy Wan","doi":"10.1257/AERI.20200261","DOIUrl":"https://doi.org/10.1257/AERI.20200261","url":null,"abstract":"We study the causes of sustained participation in political movements. To identify the persistent effect of protest participation, we randomly indirectly incentivize Hong Kong university students into participation in an antiauthoritarian protest. To identify the role of social networks, we randomize this treatment’s intensity across major-cohort cells. We find that incentives to attend one protest within a political movement increase subsequent protest attendance but only when a sufficient fraction of an individual’s social network is also incentivized to attend the initial protest. One-time mobilization shocks have dynamic consequences, with mobilization at the social network level important for sustained political engagement. (JEL D72, D74, I23, Z13)","PeriodicalId":29954,"journal":{"name":"American Economic Review-Insights","volume":" ","pages":""},"PeriodicalIF":8.5,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48447952","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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