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2017/18 Winter Term

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Applied Micro Workshop – Ran Spiegler, “The Variable Selection Curse” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Oct 17, 2017 05:15 to Oct 17, 2017 06:00)
Kfir Eliaz and Ran Spiegler: “The Variable Selection Curse” We study a model in which a “classical statistician” takes an action on behalf of an agent, based on a random sample involving other agents. The statistician estimates a predictive model, and the action that he takes is the model’s estimate given the agent’s disclosed personal characteristics. The estimation procedure involves variable selection (in the spirit of methods like LASSO). We ask the following question: Is truth-telling an optimal disclosure strategy for the agent, given the statistician’s procedure? In particular, could the agent be better off by always reporting “default” values for all personal characteristics? We discuss the possible implications of our theoretical exercise for the increasing reliance on “machine learning” methods that involve explicit variable selection in various real-life settings, such as online content provision.
Applied Micro Workshop – Emir Kamenica, “Coming apart? Lives of the rich and the poor over time” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Oct 24, 2017 04:30 to Oct 24, 2017 06:00)
Marianne Bertrand and Emir Kamenica: “Coming apart? Lives of the rich and the poor over time” We analyze temporal trends in cultural distance between the rich and the poor in the United States. Our measure of cultural distance is the ability to infer whether an individual is in the top or bottom household income quartile based on his or her (i) media consumption, (ii) consumer behavior, (iii) time use, and (iv) social attitudes. We find that income-based differences in media consumption, consumer behavior, and time use have been constant over time. In contrast, the ability to correctly infer top-or-bottom income quartile from social attitudes has increased from 70% in 1972 to 80% today.
Applied Micro Workshop – Katrine Vellesen Løken, “Incarceration, Recidivism and Employment” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Nov 07, 2017 04:30 to Nov 07, 2017 06:00)
Manudeep Bhuller, Gordon B. Dahl, Katrine V. Løken, and Magne Mogstad: “Incarceration, Recidivism and Employment” Understanding whether, and in what situations, time spent in prison is criminogenic or preventive has proven challenging due to data availability and correlated unobservables. This paper overcomes these challenges in the context of Norway’s criminal justice system, offering new insights into how incarceration affects subsequent crime and employment. We construct a panel dataset containing the criminal behavior and labor market outcomes of the entire population, and exploit the random assignment of criminal cases to judges who differ systematically in their stringency in sentencing defendants to prison. Using judge stringency as an instrumental variable, we find that imprisonment discourages further criminal behavior, and that the reduction extends beyond incapacitation. Incarceration decreases the probability an individual will reoffend within 5 years by 27 percentage points, and reduces the number of offenses over this same period by 10 criminal charges. In comparison, OLS shows positive associations between incarceration and subsequent criminal behavior. This sharp contrast suggests the high rates of recidivism among ex-convicts is due to selection, and not a consequence of the experience of being in prison. Exploring factors that may explain the preventive effect of incarceration, we find the decline in crime is driven by individuals who were not working prior to incarceration. Among these individuals, imprisonment increases participation in programs directed at improving employability and reducing recidivism, and ultimately, raises employment and earnings while discouraging further criminal behavior. Contrary to the widely embraced ‘nothing works’ doctrine, these findings demonstrate that time spent in prison with a focus on rehabilitation can indeed be preventive.
Applied Micro Workshop – Imran Rasul, “Tackling Youth Unemployment: Evidence from a Labor Market Experiment in Uganda” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Nov 15, 2017 03:00 to Nov 15, 2017 04:30)
Livia Alfonsi, Oriana Bandiera, Vittorio Bassi, Robin Burgess, Imran Rasul, Munshi Sulaiman, and Anna Vitali: “Tackling Youth Unemployment: Evidence from a Labor Market Experiment in Uganda” We design a labor market experiment that compares demand-side and supply-side policies to tackle youth unemployment, a key issue in low-income countries. The two-sided experiment tracks 1700 workers and 1500 treatment and control firms over four years to evaluate the effect of offering workers vocational training before they enter the labor market, to offering firms wage subsidies to train workers on-the-job. Relative to control workers, the employment rate of vocationally trained (VT) and firm-trained (FT) workers increases by 21% and 14% respectively, and total earnings increase by 34% and 20%. Structural estimates of a job ladder model reveal that VT workers receive higher rates of job offers when unemployed, and higher rates of job-to-job offers. This greater labor market mobility causes the wage profiles of VT workers to diverge away from FT workers over time. The firm-side of the experiment further shows that some of the higher returns to VT are driven by workers matching to higher productivity firms, that most of the surplus generated by firm-trained workers is captured by firms in higher profits, and that the long run net effect on the number of firm employees is zero. We conclude that although both vocational and firm-provided training reduce youth unemployment, from a worker’s perspective, tackling the issue by skilling youth using vocational training pre-labor market entry, is more effective than by incentivizing firms through wage subsidies to hire young labor market entrants.
Applied Micro Workshop – Eliana La Ferrara, “The entertaining way to behavioral change” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Nov 21, 2017 04:30 to Nov 21, 2017 06:00)
Abhijit Banerjee, Eliana La Ferrara, and Victor Orozco: “The entertaining way to behavioral change” We test the effectiveness of an entertainment education TV series, MTV Shuga, aimed at providing information and changing attitudes and behaviors related to HIV/AIDS. Using a simple model we show that “edutainment” can work through an “information” or through a “conformity” channel. We conducted a randomized controlled trial in urban Nigeria where young viewers were exposed to Shuga or to a non-educational TV series. Among those who watched Shuga, we created additional variation in the “social messages” they received and in the people with whom they watched the show. We find significant improvements in knowledge and attitudes towards HIV and risky sexual behavior. Treated subjects are twice as likely to get tested for HIV 6 to 9 months after the intervention. We also find reductions in STDs among women. Our experimental manipulations of the social norm component did not produce significantly different results from the main treatment. Also, we detect significant spillovers on knowledge but not on behavior for friends who did not watch Shuga. The “information” effect of edutainment thus seems to have prevailed in the context of our study.
Applied Micro Workshop – Sandro Ambühl, “For They Know Not What They Do: Selection Effects of Incentives When Information Is Costly” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Nov 28, 2017 04:00 to Nov 28, 2017 05:30)
Sandro Ambühl, Axel Ockenfels, and Colin Stewart: “For They Know Not What They Do: Selection Effects of Incentives When Information Is Costly” We ask who participates in transactions when information about the consequences must be learned. Theoretically, we show that rational decision makers for whom learning is more difficult will respond more strongly to incentives for participating, and decide to participate based on worse information. Consequently, with higher incentives, the pool of participants consists of a larger fraction of individuals with a limited understanding of the consequences of their decision. Our behavioral experiment confirms these predictions, both for experimental variation in the costs of information acquisition, and for various laboratory and naturally occurring measures of information costs, including cognitive ability. These findings are relevant for any transaction in which a price paid for participation trades off with not fully understood yet learnable consequences and has applications throughout economics. Our results help address ethical concerns with incentives.
Applied Micro Workshop – Fabian Dvořák, “An experimental measure of conformity and disconformity” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Dec 05, 2017 04:00 to Dec 05, 2017 05:30)
Fabian Dvořák: “An experimental measure of conformity and disconformity” There is abundant evidence for conformity but there are also situations in which people try to set themselves apart. The underlying motives for disconformity are rarely studied. We present an experimental design in line with ExpEcon standards to detect both conformity and disconformity in the laboratory. We use this design to study the effect of punishment and reward on conformity and disconformity in preferences and judgments. Our experiment follows a 3 (punishment vs. no incentive vs. reward) × 2 (art preferences vs. quiz judgements) design. To implement punishment and reward, the choices of a group of participants are shown to a non-group member, who assigns either a deduction or a bonus to one participant. We find that punishment leads to more conformity and reward leads to more disconformity. Conformity is generally more frequent in judgements. Disconformity is rare. It exists only in a minority of participants in the reward treatment.
Applied Micro Workshop – Nathan Nunn, “Understanding Cultural Persistence and Change” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Dec 12, 2017 04:00 to Dec 12, 2017 05:30)
Paola Giuliano and Nathan Nunn: “Understanding Cultural Persistence and Change” When does culture persist and when does it change? We examine a determinant that has been put forth in the anthropology literature: the variability of the environment from one generation to the next. A prediction, which emerges from a class of existing models from evolutionary anthropology, is that following the customs of the previous generation is relatively more beneficial in stable environments where the culture that has evolved up to the previous generation is more likely to be relevant for the subsequent generation. We test this hypothesis by measuring the variability of average temperature across 20-year generations from 500–1900. Looking across countries, ethnic groups, and the descendants of immigrants, we find that populations with ancestors who lived in environments with more stability from one generation to the next place a greater importance in maintaining tradition today. These populations also exhibit more persistence in their traditions over time.
Applied Micro Workshop – Peter P. Wakker, “Measuring Ambiguity Attitudes for All (Natural) Events” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Jan 16, 2018 04:00 to Jan 16, 2018 05:30)
Aurélien Baillon, Zhenxing Huang, Asli Selim, and Peter P. Wakker: “Measuring Ambiguity Attitudes for All (Natural) Events” Uncertainties usually don’t come with objective statistical probabilities, and subjective probabilities usually don’t work either (Ellsberg 1961). Gilboa & Schmeidler’s break-through brought fundamentally new models, opening up the field of ambiguity, sorely needed in many disciplines in economics. Ambiguity attitudes have so far been measured almost exclusively for artificial events (Ellsberg urns and experimenter-specified probability intervals) because researchers did not know how to control for unknown beliefs otherwise. Ellsberg (2011) and many others emphasized the importance of extending to natural events. By showing how to control for beliefs even if unknown, we provide this extension. Ambiguity attitudes can now be measured for natural events, greatly enhancing external validity. We introduce indexes of ambiguity aversion and ambiguity perception (or sensitivity) for natural events that are easy to use in experiments, taking only a few minutes. Thus, they can easily be used as an add-on in regressions. We prove that our indexes generalize and unify many indexes proposed before in the literature under various theories, including multiple priors, Choquet expected utility, prospect theory, and biseparable utility. Our indexes generalize their predecessors by: (a) being directly observable; (b) not requiring expected utility for risk; (c) being valid for a large number of ambiguity theories; (d) requiring no assessment of subjective likelihoods and, hence, which is our main novelty, (e) being applicable to natural ambiguities. Because time pressure is important in many economic decisions, and has recently been introduced in experimental economics to control cognitive factors—following decades of use in psychology—we apply our indexes to examining the role of ambiguity attitudes on behavior under time pressure. In an experiment, we find plausible results, supporting validity. For natural events, the cognitive perception/sensitivity of ambiguity is more important, and the motivational aversion is less pronounced, than for artificial Ellsberg events.
Applied Micro Workshop – Philip Oreopoulos, “Applying Behavioral Insights Towards Helping Improve College Success: Three Large Field Experiments” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Jan 23, 2018 04:00 to Jan 23, 2018 05:30)
Philip Oreopoulos: “Applying Behavioral Insights Towards Helping Improve College Success: Three Large Field Experiments” Many social scientists and policy makers express concern over low levels of college completion and poor overall academic performance. One explanation, drawing on recent insights from behavioral science, suggests that youth often overemphasize the present or rely too much on routine. This paper reports results from three experiments to counter these tendencies using online and texting support. All first-year economics students at the University of Toronto were asked to complete a ‘warm-up exercise’ for a small percentage of their course grade. Iterating from previous experiments, we examine 1) a personalized coaching program that uses text messaging for communicating and computer support for better managing coach/student relations; 2) a ‘growth and belonging mindset’ intervention shown recently to have promising effects; and 3) an online and texting program to emphasize the importance of sufficient study time and advice on how to manage time effectively. All three interventions are relatively low-cost, scalable, and offer new approaches for supporting student success.
Applied Micro Workshop – Joël van der Weele, “Denial and Alarmism in Collective Action Problems” (briq, Seminar Room 9/1.1, Schaumburg-Lippe-Straße 9, from Jan 30, 2018 04:00 to Jan 30, 2018 05:30)
Manuel Foerster and Joël van der Weele: “Denial and Alarmism in Collective Action Problems” We analyze theoretically how two agents share information about the social returns to investment in a public good. Agents have private information about these returns as well as their own taste for cooperation, or social preferences. Before deciding to contribute or not, each agent submits an unverifiable report about the returns to the other agent. We show that others’ willingness to cooperate generates an incentive for “alarmism”, the exaggeration of social returns in order to opportunistically induce more investment. Moreover, if people care sufficiently about being perceived as cooperators, equilibrium communication features “denial” about the returns, in order to justify own low contributions. We illustrate the model in the context of climate change denial, and present the design and preliminary results of a pilot experiment.
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