Abstract
Little is known about whether people make good choices when facing important decisions. This article reports on a large-scale randomized field experiment in which research subjects having ...difficulty making a decision flipped a coin to help determine their choice. For important decisions (e.g. quitting a job or ending a relationship), individuals who are told by the coin toss to make a change are more likely to make a change, more satisfied with their decisions, and happier six months later than those whose coin toss instructed maintaining the status quo. This finding suggests that people may be excessively cautious when facing life-changing choices.
A critical question facing experimental economists is whether behavior inside the laboratory is a good indicator of behavior outside the laboratory. To address that question, we build a model in ...which the choices that individuals make depend not just on financial implications, but also on the nature and extent of scrutiny by others, the particular context in which a decision is embedded, and the manner in which participants and tasks are selected. We present empirical evidence demonstrating the importance of these various factors. To the extent that lab and naturally occurring environments systematically differ on any of these dimensions, the results obtained inside and outside the lab need not correspond. Focusing on experiments designed to measure social preferences, we discuss the extent to which the existing laboratory results generalize to naturally-occurring markets. We summarize cases where the lab may understate the importance of social preferences as well as instances in which the lab might exaggerate their importance. We conclude by emphasizing the importance of interpreting laboratory and field data through the lens of theory.
Crime dropped sharply and unexpectedly in the United States in the 1990s. I conclude that four factors collectively explain the entire drop in crime: increases in the number of police, increases in ...the size of the prison population, the waning of the crack epidemic, and the legalization of abortion in the 1970s. Other common explanations for declining crime appear far less important. The factors identified are much less successful in explaining fluctuations in crime in the preceding two decades. The real puzzle is not why crime fell in the 1990s, but rather, why crime did not begin falling earlier.
We explore the power of behavioral economics to influence the level of effort exerted by students in a low stakes testing environment. We find a substantial impact on test scores from incentives when ...the rewards are delivered immediately. There is suggestive evidence that rewards framed as losses outperform those framed as gains. Nonfinancial incentives can be considerably more cost-effective than financial incentives for younger students, but are less effective with older students. All motivating power of incentives vanishes when rewards are handed out with a delay. Our results suggest that the current set of incentives may lead to underinvestment.
Agents are often better informed than the clients who hire them and may exploit this informational advantage. Real estate agents have an incentive to convince clients to sell their houses too cheaply ...and too quickly. We test these predictions by comparing home sales in which real estate agents are hired to when an agent sells his own home. Consistent with the theory, we find homes owned by real estate agents sell for 3.7% more than other houses and stay on the market 9.5 days longer, controlling for observables. Greater information asymmetry leads to larger distortions.
We investigate learning by doing using detailed data from a major auto producer’s assembly plant. We focus on the acquisition, aggregation, transmission, and embodiment of the knowledge stock built ...through learning. We find that most knowledge was not retained by plant workers despite their importance as a learning conduit. This is consistent with the plant’s systems for productivity measurement and improvement. We further explore how learning at the hundreds of processes along the production line undergirds plantwide productivity. Our results shed light on how productivity gains accrue at the plant level and how firms apply managerial inputs to expand production.
We document and analyze the emergence of a substantial gender gap in mathematics in the early years of schooling using a large, recent, and nationally representative panel of US children. There are ...no mean differences between boys and girls upon entry to school, but girls lose more than two-tenths of a standard deviation relative to boys over the first six years of school. The ground lost by girls relative to boys is roughly half as large as the black-white test score gap that appears over these same ages. We document the presence of this gender math gap across every strata of society. We explore a wide range of possible explanations in the data, including less investment by girls in math, low parental expectations, and biased tests, but find little support for these theories. Moving to cross-country comparisons, we find earlier results linking the gender gap in math to measures of gender equality are sensitive to the inclusion of Muslim countries, where, in spite of women's low status, there is little or no gender gap in math.
In previous research, a substantial gap in test scores between white and black students persists, even after controlling for a wide range of observable characteristics. Using a newly available data ...set (the Early Childhood Longitudinal Study), we demonstrate that in stark contrast to earlier studies, the black-white test score gap among incoming kindergartners disappears when we control for a small number of covariates. Real gains by black children in recent cohorts appear to play an important role in explaining the differences between our findings and earlier research. The availability of better covariates also contributes. Over the first two years of school, however, blacks lose substantial ground relative to other races. There is suggestive evidence that differences in school quality may be an important part of the explanation. None of the other hypotheses we test to explain why blacks are losing ground receive any empirical backing.
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