Showing papers in "Quarterly Journal of Economics in 2003"
TL;DR: The authors showed that the large shocks that capital owners experienced during the Great Depression and World War II have had a permanent effect on top capital incomes and argued that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks.
Abstract: This paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the United States using individual tax returns data. Top income and wages shares display a U-shaped pattern over the century. Our series suggest that the large shocks that capital owners experienced during the Great Depression and World War II have had a permanent effect on top capital incomes. We argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks. Top wage shares were flat before World War II, dropped precipitously during the war, and did not start to recover before the late 1960s but are now higher than before World War II. As a result, the working rich have replaced the rentiers at the top of the income distribution.
3,263 citations
TL;DR: In this paper, the authors investigate whether and how individual managers affect corporate behavior and performance and show that managers with higher performance effects receive higher compensation and are more likely to be found in better governed environments.
Abstract: This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-e rm matched panel data set which enables us to track the top managers across different e rms over time. We e nd that manager e xed effects matter for a wide range of corporate decisions. A signie cant extent of the heterogeneity in investment, e nancial, and organizational practices of e rms can be explained by the presence of manager e xed effects. We identify specie c patterns in managerial decision-making that appear to indicate general differences in “ style” across managers. Moreover, we show that management style is signie cantly related to manager e xed effects in performance and that managers with higher performance e xed effects receive higher compensation and are more likely to be found in better governed e rms. In a e nal step, we tie back these e ndings to observable managerial characteristics. We e nd that executives from earlier birth cohorts appear on average to be more conservative; on the other hand, managers who hold an MBA degree seem to follow on average more aggressive strategies.
3,245 citations
TL;DR: This paper found that computer capital substitutes for workers in performing cognitive and manual tasks that can be accomplished by following explicit rules, and complements workers in non-routine problem-solving and complex communications tasks.
Abstract: We apply an understanding of what computers do to study how computerization alters job skill demands. We argue that computer capital (1) substitutes for workers in performing cognitive and manual tasks that can be accomplished by following explicit rules; and (2) complements workers in performing nonroutine problem-solving and complex communications tasks. Provided these tasks are imperfect substitutes, our model implies measurable changes in the composition of job tasks, which we explore using representative data on task input for 1960 to 1998. We find that within industries, occupations and education groups, computerization is associated with reduced labor input of routine manual and routine cognitive tasks and increased labor input of nonroutine cognitive tasks. Translating task shifts into education demand, the model can explain sixty percent of the estimated relative demand shift favoring college labor during 1970 to 1998. Task changes within nominally identical occupations account for almost half of this impact.
2,843 citations
TL;DR: In this article, the authors present experimental evidence in support of an additional factor: women may be less effective than men in competitive environments, even if they are able to perform similarly in non-competitive environments.
Abstract: Even though the provision of equal opportunities for men and women has been a priority in many countries, large gender differences prevail in competitive high-ranking positions. Suggested explanations include discrimination and differences in preferences and human capital. In this paper we present experimental evidence in support of an additional factor: women may be less effective than men in competitive environments, even if they are able to perform similarly in non-competitive environments. In a laboratory experiment we observe, as we increase the competitiveness of the environment, a significant increase in performance for men, but not for women. This results in a significant gender gap in performance in tournaments, while there is no gap when participants are paid according to piece rate. This effect is stronger when women have to compete against men than in single-sex competitive environments: this suggests that women may be able to perform in competitive environments per se.
1,943 citations
TL;DR: In this article, the authors identify job networks among Mexican migrants in the U.S. labor market and verify that the same individual is more likely to be employed and to hold a higher paying nonagricultural job when his network is exogenously larger, by including individual fixed effects in the employment and occupation regressions.
Abstract: This paper attempts to identify job networks among Mexican migrants in the U. S. labor market. The empirical analysis uses data on migration patterns and labor market outcomes, based on a sample of individuals belonging to multiple origin-communities in Mexico, over a long period of time. Each community's network is measured by the proportion of the sampled individuals who are located at the destination (the United States) in any year. We verify that the same individual is more likely to be employed and to hold a higher paying nonagricultural job when his network is exogenously larger, by including individual fixed effects in the employment and occupation regressions and by using rainfall in the origin-community as an instrument for the size of the network at the destination.
1,738 citations
TL;DR: The authors show that initial valuations of familiar products and simple hedonic experiences are strongly influenced by arbitrary "anchors" (sometimes derived from a person's social security number) and that subsequent valuations are also coherent with respect to salient differences in perceived quality or quantity of these products and experiences.
Abstract: In six experiments we show that initial valuations of familiar products and simple hedonic experiences are strongly influenced by arbitrary “anchors” (sometimes derived from a person’s social security number). Because subsequent valuations are also coherent with respect to salient differences in perceived quality or quantity of these products and experiences, the entire pattern of valuations can easily create an illusion of order, as if it is being generated by stable underlying preferences. The experiments show that this combination of coherent arbitrariness (1) cannot be interpreted as a rational response to information, (2) does not decrease as a result of experience with a good, (3) is not necessarily reduced by market forces, and (4) is not unique to cash prices. The results imply that demand curves estimated from market data need not reveal true consumer preferences, in any normatively significant sense of the term.
1,381 citations
TL;DR: This article developed a new approach for estimating the labor market impact of immigration by exploiting this variation in supply shifts across education-experience groups, assuming that similarly educated workers with different levels of experience participate in a national labor market.
Abstract: Immigration is not evenly balanced across groups of workers who have the same education but differ in their work experience, and the nature of the supply imbalance changes over time. This paper develops a new approach for estimating the labor market impact of immigration by exploiting this variation in supply shifts across education-experience groups. I assume that similarly educated workers with different levels of experience participate in a national labor market and are not perfect substitutes. The analysis indicates that immigration lowers the wage of competing workers: a 10 percent increase in supply reduces wages by 3 to 4 percent.
1,359 citations
TL;DR: The authors examined individual behavior in two well-functioning marketplaces to investigate whether market experience eliminates the endowment effect and found that individual behavior converges to the neoclassical prediction as market experience increases.
Abstract: This study examines individual behavior in two well-functioning marketplaces to investigate whether market experience eliminates the endowment effect. Field evidence from both markets suggests that individual behavior converges to the neoclassical prediction as market experience increases. In an experimental test of whether these observations are due to treatment (market experience) or selection (e.g., static preferences), I end that market experience plays a signiecant role in eliminating the endowment effect. I also end that these results are robust to institutional change and extend beyond the two marketplaces studied. Overall, this study provides strong evidence that market experience eliminates an important market anomaly.
1,180 citations
TL;DR: The authors showed that while empirical household expectations are not rational in the usual sense, expectational dynamics are well captured by a model in which households' views derive from news reports of the views of professional forecasters, which in turn may be rational.
Abstract: Economists have long emphasized the importance of expectations in determining macroeconomic outcomes. Yet there has been almost no recent effort to model actual empirical expectations data; instead ,m acroeconomists usually simply assume that expectations are ‘rational.’ This paper shows that while empirical household expectations are not rational in the usual sense, expectational dynamics are well captured by a model in which households’ views derive from news reports of the views of professional forecasters, which in turn may be rational. The model’s estimates imply that people only occasionally pay attention to news reports; this inattention generates ‘stickyness’ in aggregate expectations, with important macroeconomic consequences.
1,053 citations
TL;DR: This article found that between 1984 and 2001, the share of nonelderly adults receiving Social Security Disability Insurance income (DI) rose by 60 percent to 5.3 million beneficiaries, due to reduced screening stringency, declining demand for less skilled workers, and an unforeseen increase in the earnings replacement rate.
Abstract: Between 1984 and 2001, the share of nonelderly adults receiving Social Security Disability Insurance income (DI) rose by 60 percent to 5.3 million beneficiaries. Rapid program growth despite improving aggregate health appears to be explained by reduced screening stringency, declining demand for less skilled workers, and an unforeseen increase in the earnings replacement rate. We estimate that the sum of these forces doubled the labor force exit propensity of displaced high school dropouts after 1984, lowering measured U. S. unemployment by one-half a percentage point. Steady state calculations augur a further 40 percent increase in the rate of DI receipt.
937 citations
TL;DR: This article found that living in enclaves improves labor market outcomes; for instance, the earnings gain associated with a standard deviation increase in ethnic concentration is in the order of four to five percent.
Abstract: Recent immigrants tend to locate in ethnic ”enclaves” within metropolitan areas. The economic consequence of living in such enclaves is still an unresolved issue. We use an immigrant policy initiative in Sweden, when government authorities distributed refugee immigrants across locales in a way that may be considered exogenous. This policy initiative provides a unique natural experiment, which allows us to estimate the causal effect on labor market outcomes of living in enclaves. We find substantive evidence of sorting across locations. When sorting is taken into account, living in enclaves improves labor market outcomes; for instance, the earnings gain associated with a standard deviation increase in ethnic concentration is in the order of four to five percent.
TL;DR: In this paper, the authors examined the effect of maternal education on birth outcomes using Vital Statistics Natality data from 1970 to 1999 and found that higher maternal education improves infant health as measured by birth weight and gestational age.
Abstract: We examine the effect of maternal education on birth outcomes using Vital Statistics Natality data from 1970 to 1999. We also assess the importance of four channels through which maternal education may improve birth outcomes: use of prenatal care smoking marriage and fertility. In an effort to account for the endogeneity of education attainment we use data about the availability of colleges in the womans country in her 17th year as an instrument for maternal education. We find that higher maternal education improves infant health as measured by birth weight and gestational age. It also increases the probability that a new mother is married reduces parity increases use of prenatal care and reduces smoking suggesting that may be important pathways for the ultimate effect on health. Our results add to the growing body of literature which suggests that estimates of the returns to education which focus only on increases in wages understate the total return.
TL;DR: In this article, the authors build a model based on two central assumptions: Monopolistic competition in the goods market and bargaining in the labor market, which determines the distribution of rents between workers and firms.
Abstract: Product and labor market deregulation are fundamentally about reducing and redistributing rents, leading economic players to adjust in turn to this new distribution. Thus, even if deregulation eventually proves beneficial, it comes with strong distribution and dynamic effects. The transition may imply the decline of incumbent firms. Unemployment may increase for a while. Real wages may decrease before recovering, and so on. To study these issues, we build a model based on two central assumptions: Monopolistic competition in the goods market, which determines the size of rents; and bargaining in the labor market, which determines the distribution of rents between workers and firms. We then think of product market regulation as determining both the entry costs faced by firms, and the degree of competition between firms. We think of labor market regulation as determining the bargaining power of workers. Having characterized the effects of labor and product market deregulation, we then use our results to study two specific issues. First, to shed light on macroeconomic evolutions in Europe over the last twenty years, in particular on the behavior of the labor share. Second, to look at political economy interactions between product and labor market deregulation.
TL;DR: In this paper, a randomized experiment was conducted to shed light on the role of information and social interactions in employees' decisions to enroll in a Tax Deferred Account (TDA) retirement plan within a large university.
Abstract: This paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees’ decisions to enroll in a Tax Deferred Account (TDA) retirement plan within a large university. The experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university, by promising a monetary reward for attendance. The experiment multiplied by more than e ve the attendance rate of these treated individuals (relative to controls), and tripled that of untreated individuals within departments where some individuals were treated. TDA enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated. However, the effect on TDA enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did. We provide three interpretations— differential treatment effects, social network effects, and motivational reward effects— to account for these results.
TL;DR: In this article, the authors proposed an incomplete-contracting, property-rights model of the boundaries of the firm, which they incorporated into a standard trade model with imperfect competition and product differentiation.
Abstract: Roughly one-third of world trade is intrafirm trade. This paper starts by unveiling two systematic patterns in the volume of intrafirm trade. In a panel of industries, the share of intrafirm imports in total U.S. imports is significantly higher, the higher the capital intensity of the exporting industry. In a cross-section of countries U.S. imports is significantly higher, the higher the capital-labor ratio of the exporting country. I then show that these patterns can be rationalized in a theoretical framework that combines a Grossman-Hart-Moore view of the firm with a Helpman-Krugman view of international trade. In particular an incomplete-contracting, property-rights model of the boundaries of the firm, which I then incorporate into a standard trade model with imperfect competition and product differentiation. The model pins down the boundaries of multinational firms as well as the international location of production, and it is shown to predict the patterns of intrafirm trade identified above. Econometric evidence reveals that the model is consistent with other qualitative and quantitative features of the data.
TL;DR: In this article, the authors present evidence from a variety of domains which demonstrates the prevalence of such projection bias, develop a formal model of it, and use this model to demonstrate its importance in economic environments.
Abstract: People exaggerate the degree to which their future tastes will resemble their current tastes. We present evidence from a variety of domains which demonstrates the prevalence of such projection bias, develop a formal model of it, and use this model to demonstrate its importance in economic environments. We show that, when people exhibit habit formation, projection bias leads people to consume too much early in life, and to decide, as time passes, to consume more— and save less— than originally planned. Projection bias can also lead to misguided purchases of durable goods. We discuss a number of additional applications and implications.
TL;DR: In this article, the impact of total suspended particulates (TSPs) pollution on infant mortality was investigated and the authors found that a one-percent reduction in TSPs results in a 035 percent decline in the infant mortality rate at the county level.
Abstract: The 1981-1982 recession induced substantial variation across sites in air pollution reductions This is used to estimate the impact of total suspended particulates (TSPs) on infant mortality We find that a one-percent reduction in TSPs results in a 035 percent decline in the infant mortality rate at the county level, implying that 2,500 fewer infants died from 1980-1982 than would have in the absence of the TSPs reductions Most of these effects are driven by fewer deaths occurring within one month of birth, suggesting that fetal exposure is a potential pathophysiologic mechanism The analysis also reveals nonlinear effects of TSPs pollution and greater sensitivity of black infant mortality at the county level Importantly, the estimates are stable across a variety of specifications
TL;DR: This paper used a simple model to outline the conditions under which corporate investment will be sensitive to non-fundamental al movements in stock prices and found that firms that rank in the top quintile of the KZ index have investment that is almost three times as sensitive to stock prices as firms in the bottom quintile.
Abstract: We use a simple model to outline the conditions under which corporate investment will be sensitive to non-fundament al movements in stock prices. The key cross-sectional prediction of the model is that stock prices will have a stronger impact on the investment of firms that are “equity dependent” – firms that need external equity to finance their marginal investments. Using an index of equity dependence based on the work of Kaplan and Zingales (1997), we find strong support for this prediction. In particular, firms that rank in the top quintile of the KZ index have investment that is almost three times as sensitive to stock prices as firms in the bottom quintile. We also verify several other predictions of the model.
TL;DR: This paper studied the effects of discretionary fiscal policy on output volatility and economic growth using data for 91 countries and found that governments that use fiscal policy aggressively induce significant macroeconomic instability, and that the volatility of output caused by discretionary policy lowers economic growth by more than 0.8 percentage points.
Abstract: This paper studies the effects of discretionary fiscal policy on output volatility and economic growth. Using data for 91 countries, we isolate three empirical regularities: (1) governments that use fiscal policy aggressively induce significant macroeconomic instability; (2) the volatility of output caused by discretionary fiscal policy lowers economic growth by more than 0.8 percentage points for every percentage point increase in volatility; (3) prudent use of fiscal policy is explained to a large extent by the presence of political constraints and other political and institutional variables. The evidence in the paper supports arguments for constraining discretion by imposing institutional restrictions on governments as a way to reduce output volatility and increase the rate of economic growth.
TL;DR: Jacob and Levitt as mentioned in this paper investigated the prevalence and predictors of teacher cheating in Chicago Public Schools. But they did not consider the role of teachers in the cheating and did not identify any teachers who were involved in cheating.
Abstract: NBER WORKING PAPER SERIES ROTTEN APPLES: AN INVESTIGATION OF THE PREVALENCE AND PREDICTORS OF TEACHER CHEATING Brian A. Jacob Steven D. Levitt Working Paper 9413 http://www.nber.org/papers/w9413 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 December 2002 We would like to thank Suzanne Cooper, Mark Duggan, Sue Dynarski, Arne Duncan, Michael Greenstone, James Heckman, Lars Lefgren, and seminar participants too numerous to mention for helpful comments and discussions. We also thank Arne Duncan, Phil Hansen, Carol Perlman, and Jessie Qualles of the Chicago Public Schools for their help and cooperation on the project. Financial support was provided by the National Science Foundation and the Sloan Foundation. All remaining errors are our own. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. © 2002 by Brian A. Jacob and Steven D. Levitt. All rights reserved. Short sections of text not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including, © notice, is given to the source.
TL;DR: This paper proposed a boundedly rational model of opinion formation in which individuals are subject to persuasion bias, i.e., they fail to account for possible repetition in the information they receive.
Abstract: We propose a boundedly-rational model of opinion formation in which individuals are subject to persuasion bias; that is, they fail to account for possible repetition in the information they receive. We show that persuasion bias implies the phenomenon of social inuenc e, whereby one’s inuence on group opinions depends not only on accuracy, but also on how well-connected one is in the social network that determines communication. Persuasion bias also implies the phenomenon of unidimensional opinions; that is, individuals’ opinions over a multidimensional set of issues converge to a single \left-right" spectrum. We explore the implications of our model in several natural settings, including political science and marketing, and we obtain a number of novel empirical implications.
TL;DR: The authors examined the effect of an increase in product quality information to consumers on e rms' choices of product quality and showed that the grade cards cause restaurant health inspection scores to increase, consumer demand to become sensitive to changes in restaurants' hygiene quality, and the number of foodborne illness hospitalizations to decrease.
Abstract: This study examines the effect of an increase in product quality information to consumers on e rms’ choices of product quality. In 1998 Los Angeles County introduced hygiene quality grade cards to be displayed in restaurant windows. We show that the grade cards cause (i) restaurant health inspection scores to increase, (ii) consumer demand to become sensitive to changes in restaurants’ hygiene quality, and (iii) the number of foodborne illness hospitalizations to decrease. We also provide evidence that this improvement in health outcomes is not fully explained by consumers substituting from poor hygiene restaurants to good hygiene restaurants. These results imply that the grade cards cause restaurants to make hygiene quality improvements.
TL;DR: This article found that neighborhood quality plays little role in determining a youth's adult earnings, education attainment, or welfare participation, but does affect exposure to crime, while living in contrasting housing projects cannot explain large variances in labor market outcomes, family differences as measured by sibling outcome correlations, account for up to 30 percent of the total variance in the data.
Abstract: Author(s): Oreopoulos, Philip | Abstract: Many social scientists presume that the quality of the neigborhood to which children are exposed affects a variety of long-run social outcomes. I examine the effect on the long-run labor market outcomes of adults who were assigned, when young, to substantially different public housing projects in Toronto. Administrative data are matched to public housing addresses to track children from the program for over 15 years. The main finding is that neighborhood quality plays little role in determining a youth's adult earnings, education attainment, or welfare participation, but does affect exposure to crime. While living in contrasting housing projects cannot explain large variances in labor market outcomes, family differences, as measured by sibling outcome correlations, account for up to 30 percent of the total variance in the data.
TL;DR: This paper showed that middle-class American families (from roughly the fortieth to the eightieth percentile of the wealth distribution) have more than half their assets in the form of housing.
Abstract: The portfolio of the typical American household is quite unlike the diversie ed portfolio of liquid assets discussed in e nance textbooks. The major asset in the portfolio is a house, a relatively illiquid asset with an uncertain capital value. The value of the house generally exceeds the net worth of the household, which e nances its homeownership through a mortgage contract to create a leveraged position in residential real estate. Other e nancial assets and liabilities are typically far less important than the house and its associated mortgage contract. The importance of housing in household wealth is illustrated in Figure I. This e gure plots the fraction of household assets in housing and in equities against the wealth percentile of the household. Poor households appear at the left of the e gure, and wealthy households at the right. Data come from the 1989 and 1998 Survey of Consumer Finances. The e gure shows that middle-class American families (from roughly the fortieth to the eightieth percentile of the wealth distribution) have more than half their assets in the form of housing. Even after the expansion of equity ownership during the 1990s, equities are of negligible importance for these households. 1
TL;DR: This article found that those with a higher propensity to plan spend more time developing financial plans, and that this shift in planning is associated with increased wealth, which is consistent with broad psychological evidence concerning the benee cial impacts of planning on goal pursuit.
Abstract: Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach e nancial planning are a signie cant factor. We use new and unique survey data to assess these differences and to measure each household’ s “ propensity to plan.” We show that those with a higher such propensity spend more time developing e nancial plans, and that this shift in planning is associated with increased wealth. These e ndings are consistent with broad psychological evidence concerning the benee cial impacts of planning on goal pursuit. Those with a high propensity to plan may be better able to control their spending, and thereby achieve their goal of wealth accumulation. We e nd direct evidence supporting this effortful self-control channel in the very strong relationship we uncover between the propensity to plan and budgeting behavior.
TL;DR: In this paper, the authors explore the hypothesis that increases in the demand for forest products associated with income and population growth lead to forest growth and show that neither the expansion of agricultural productivity nor rising wages in India increased local forest cover.
Abstract: Although forests have diminished globally over the past 400 years, forest cover has increased in some areas, including India in the last two decades. Aggregate time-series evidence on forest growth rates and income growth across countries and within India and a newly assembled data set that combines national household survey data, census data, and satellite images of land use in rural India at the village level over a 29-year period are used to explore the hypothesis that increases in the demand for forest products associated with income and population growth lead to forest growth. The evidence is consistent with this hypothesis, which also shows that neither the expansion of agricultural productivity nor rising wages in India increased local forest cover.
TL;DR: In this article, the authors use an augmented gravity model to examine the gold standard, tariffs, and transport costs as determinants of trade, and find that until 1913, the rise of gold standard and the fall in transport costs were the main trade-creating forces.
Abstract: Measured by the ratio of trade to output, the period 1870–1913 marked the birth of the first era of trade globalization and the period 1914–1939 its death. What caused the boom and bust? We use an augmented gravity model to examine the gold standard, tariffs, and transport costs as determinants of trade. Until 1913 the rise of the gold standard and the fall in transport costs were the main trade-creating forces. As of 1929 the reversal was driven by higher transport costs. In the 1930s the final collapse of the gold standard drove trade volumes even lower.
TL;DR: The authors used a difference-in-difference estimator that exploits the differential effects of the reform on individuals belonging to several yea-of-birth cohorts and different occupational groups, and found that substitutability is particularly high for workers between 35 and 45.
Abstract: This paper provides new evidence on the substitutability between private and pension wealth by exploiting the Italian pension reform of 1992. We use a difference-in-difference estimator that exploits the differential effects of the reform on individuals belonging to several yea-of-birth cohorts and different occupational groups. We find convincing evidence that saving rates increase as a result of a reduction in pension wealth. By allowing for the possibility that substitutability changes with age, we find that substitutability is particularly high (and precisely estimated) for workers between 35 and 45.
TL;DR: This article developed a tractable incomplete-markets model of economic growth in which households invest in risk-free physical capital and risky human capital and showed that a reduction in uninsurable idiosyncratic labor income risk decreases physical capital investment, but increases human capital investment.
Abstract: This paper develops a tractable incomplete-markets model of economic growth in which households invest in risk-free physical capital and risky human capital. The paper shows that a reduction in uninsurable idiosyncratic labor income risk decreases physical capital investment, but increases human capital investment, growth, and welfare. A quantitative analysis based on a calibrated version of the model reveals that these effects are substantial and of the same order of magnitude as the effects of distortionary income taxation. The analysis further suggests that government-sponsored severance payments to displaced workers increase growth and welfare even if these payments have to be e nanced through distortionary income taxation.
TL;DR: This paper examined the role of social security in an economy populated by overlapping generations of individuals with time-inconsistent preferences who face mortality risk, individual income risk, and borrowing constraints.
Abstract: In this paper we examine the role of social security in an economy populated by overlapping generations of individuals with time-inconsistent preferences who face mortality risk, individual income risk, and borrowing constraints. We find that unfunded social security lowers the capital stock, output, and consumption for consumers with time-consistent or time-inconsistent preferences. However, it may raise or lower welfare depending on the strength of time inconsistency.