Showing papers in "Quarterly Journal of Economics in 2006"
TL;DR: This article developed a model of reference-dependent preferences and loss aversion where the gain-loss utility is derived from standard consumption utility and the reference point is determined endogenously by the economic environment.
Abstract: We develop a model of reference-dependent preferences and loss aversion where “gain‐loss utility” is derived from standard “consumption utility” and the reference point is determined endogenously by the economic environment. We assume that a person’s reference point is her rational expectations held in the recent past about outcomes, which are determined in a personal equilibrium by the requirement that they must be consistent with optimal behavior given expectations. In deterministic environments, choices maximize consumption utility, but gain‐loss utility influences behavior when there is uncertainty. Applying the model to consumer behavior, we show that willingness to pay for a good is increasing in the expected probability of purchase and in the expected prices conditional on purchase. In within-day labor-supply decisions, a worker is less likely to continue work if income earned thus far is unexpectedly high, but more likely to show up as well as continue work if expected income is high.
2,079 citations
TL;DR: In this article, the authors calibrate disaster probabilities from the twentieth century global history, especially the sharp contractions associated with World War I, the Great Depression, and World War II.
Abstract: The potential for rare economic disasters explains a lot of asset-pricing puzzles. I calibrate disaster probabilities from the twentieth century global history, especially the sharp contractions associated with World War I, the Great Depression, and World War II. The puzzles that can be explained include the high equity premium, low risk-free rate, and volatile stock returns. Another mystery that may be resolved is why expected real interest rates were low in the United States during major wars, such as World War II. The model, an extension of work by Rietz, maintains the tractable framework of a representative agent, timeadditive and isoelastic preferences, and complete markets. The results hold with i.i.d. shocks to productivity growth in a Lucas-tree type economy and also with the inclusion of capital formation. The Mehra-Prescott [1985] article on the equity risk-premium puzzle has received a great deal of attention. An article published three years later by Rietz [1988] purported to solve the puzzle by bringing in low-probability economic disasters, such as the Great Depression. I think that Rietz’s basic reasoning is correct, but the profession seems to think differently, as gauged by the continued attempts to find more and more complicated ways to resolve the equity-premium puzzle. I think the major reason for skepticism about Rietz’s argument is the belief that it depends on counterfactually high probabilities and sizes of economic disasters. Thus, a key aspect of my empirical analysis is the measurement of the frequency and sizes of the international economic disasters that occurred during the twentieth century. The three principal events are World War I, the Great Depression, and World War II, but post-World War II depressions have also been significant outside of OECD countries. My analysis of these events suggests a disaster probability of 1.5–2 percent per year with a distribution of declines in per capita GDP ranging between 15 percent and 64 percent. I construct a model of the equity premium that extends Lucas
1,911 citations
TL;DR: This article showed that the import of new product varieties has contributed to national welfare gains in the United States over the last three decades (1972-2001) by increasing the number of imported product varieties by a factor of four.
Abstract: Since the seminal work of Krugman (1979), product variety has played a central role in models of trade and growth. In spite of the general use of love-of-variety models, there has been no systematic study of how the import of new varieties has contributed to national welfare gains in the United States. In this paper we show that the unmeasured growth in product variety from US imports has been an important source of gains from trade over the last three decades (1972-2001). Using extremely disaggregated data, we show that the number of imported product varieties has increased by a factor of four. We also estimate the elasticities of substitution for each available category at the same level of aggregation, and describe their behavior across time and SITC-5 industries. Using these estimates we develop an exact price index and find that the upward bias in the conventional import price index is approximately 1.2 percent per year – double the estimated impact due to hedonic adjustments on the CPI. The magnitude of this bias suggests that the welfare gains from variety growth in imports alone are 2.8 percent of GDP per year.
1,735 citations
TL;DR: The authors designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology, which was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism.
Abstract: We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current trade-offs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product.
1,053 citations
TL;DR: In this paper, the authors show that informational shrouding flourishes even in highly competitive markets, even in markets with costless advertising, and even when the shrouding generates allocational inefficiencies.
Abstract: Bayesian consumers infer that hidden add-on prices (e.g., the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding creates an inefficiency, which firms may have an incentive to eliminate by educating their competitors' customers. However, if add-ons have close substitutes, a "curse of debiasing" arises, and firms will not be able to profitably debias consumers by unshrouding add-ons. In equilibrium, two kinds of exploitation coexist. Optimizing firms exploit myopic consumers through marketing schemes that shroud high-priced add-ons. In turn, sophisticated consumers exploit these marketing schemes. It is not possible to profitably drive away the business of sophisticates. It is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms. We show that informational shrouding flourishes even in highly competitive markets, even in markets with costless advertising, and even when the shrouding generates allocational inefficiencies.
956 citations
TL;DR: In this article, the authors estimate the World Distribution of Income by integrating individual income distributions for 138 countries between 1970 and 2000, and construct country distributions by combining national accounts GDP per capita to anchor the mean with survey data to pin down the dispersion.
Abstract: We estimate the World Distribution of Income by integrating individual income distributions for 138 countries between 1970 and 2000. Country distributions are constructed by combining national accounts GDP per capita to anchor the mean with survey data to pin down the dispersion. Poverty rates and head counts are reported for four specific poverty lines. Rates in 2000 were between one-third and one-half of what they were in 1970 for all four lines. There were between 250 and 500 million fewer poor in 2000 than in 1970. We estimate eight indexes of income inequality implied by our world distribution of income. All of them show reductions in global inequality during the 1980s and 1990s.
815 citations
TL;DR: This article developed a theory of collective beliefs and motivated cognitions, including those concerning money (consumption) and happiness, as well as religion, to explain why most people feel such a need to believe in a "just world" and why this need, and therefore the prevalence of the belief, varies considerably across countries.
Abstract: International surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate. At the same time, social ethnographies and experiments by psychologists demonstrate individuals' recurrent struggle with cognitive dissonance as they seek to maintain, and pass on to their children, a view of the world where effort ultimately pays off and everyone gets their just deserts. This paper offers a model that helps explain: i) why most people feel such a need to believe in a “just world”; ii) why this need, and therefore the prevalence of the belief, varies considerably across countries; iii) the implications of this phenomenon for international differences in political ideology, levels of redistribution, labor supply, aggregate income, and popular perceptions of the poor. The model shows in particular how complementarities arise endogenously between individuals' desired beliefs or ideological choices, resulting in two equilibria. A first, “American” equilibrium is characterized by a high prevalence of just-world beliefs among the population and relatively laissez-faire policies. The other, “European” equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state. More generally, the paper develops a theory of collective beliefs and motivated cognitions, including those concerning “money” (consumption) and happiness, as well as religion.
744 citations
TL;DR: The authors showed that a continuum of ages exists within each starting class due to the use of a single school cut-off date, making the older children approximately twenty percent older than the younger children at school entry.
Abstract: A continuum of ages exists within each starting class due to the use of a single school cut-off date – making the “oldest” children approximately twenty percent older than the “youngest” children at school entry. We provide substantial evidence that these initial maturity differences have long lasting effects on student performance across OECD countries. In particular, the youngest members of each cohort score 4-12 percentiles lower than the oldest members in grade four, and 2-9 percentiles lower in grade eight, depending upon the country. In fact, data from Canada and the United States shows that the youngest members of a cohort are even less likely to enroll in pre-university academic track courses and high-end academic universities. Taken together, these findings point to important early relative maturity effects that propagate themselves into adulthood through the structure of education systems.
655 citations
TL;DR: In this article, the authors study the extent to which U.S. urban development is sprawling and what determines differences in sprawl across space, using remote-sensing data to track the evolution of land use.
Abstract: We study the extent to which U. S. urban development is sprawling and what determines differences in sprawl across space. Using remote-sensing data to track the evolution of land use on a grid of 8.7 billion 30 30 meter cells, we measure sprawl as the amount of undeveloped land surrounding an average urban dwelling. The extent of sprawl remained roughly unchanged between 1976 and 1992, although it varied dramatically across metropolitan areas. Ground water availability, temperate climate, rugged terrain, decentralized employment, early public transport infrastructure, uncertainty about metropolitan growth, and unincorporated land in the urban fringe all increase sprawl.
636 citations
TL;DR: This paper showed that substitution away from other media with more political coverage provides a plausible mechanism linking television to voting, and that the entry of television in a market coincided with sharp drops in consumption of newspapers and radio, and in political knowledge as measured by election surveys.
Abstract: I use variation across markets in the timing of television’s introduction to identify its impact on voter turnout. The estimated effect is significantly negative, accounting for between a quarter and a half of the total decline in turnout since the 1950s. I argue that substitution away from other media with more political coverage provides a plausible mechanism linking television to voting. As evidence for this, I show that the entry of television in a market coincided with sharp drops in consumption of newspapers and radio, and in political knowledge as measured by election surveys. I also show that both the information and turnout effects were largest in off-year congressional elections, which receive extensive coverage in newspapers but little or no coverage on television.
622 citations
TL;DR: In this article, the authors used plausibly exogenous variation in state consent laws to evaluate the causal impact of the pill on the timing of first births and extent and intensity of women's labor-force participation.
Abstract: The release of Enovid in 1960, the first birth control pill, afforded U. S. women unprecedented freedom to plan childbearing and their careers. This paper uses plausibly exogenous variation in state consent laws to evaluate the causal impact of the pill on the timing of first births and extent and intensity of women's labor-force participation. The results suggest that legal access to the pill before age 21 significantly reduced the likelihood of a first birth before age 22, increased the number of women in the paid labor force, and raised the number of annual hours worked.
TL;DR: In this paper, the authors examined how technology transfer among U.S. multinational firms changes in response to a series of IPR reforms undertaken by 12 countries over the 1982-99 period, revealing that royalty payments for intangibles transferred to affiliates increase at the time of reforms, as do affiliate research and development (R&D) expenditures and total levels of foreign patent applications.
Abstract: One of the alleged benefits of the recent global movement to strengthen intellectual property rights (IPRs) is that such reforms accelerate transfers of technology between countries. The paper examines how technology transfer among U.S. multinational firms changes in response to a series of IPR reforms undertaken by 12 countries over the 1982-99 period. The analysis of detailed firm-level data reveal that royalty payments for intangibles transferred to affiliates increase at the time of reforms, as do affiliate research and development (R&D) expenditures and total levels of foreign patent applications. Increases in royalty payments and R&D expenditures are more than 20 percent larger among affiliates of parent companies that use U.S. patents more extensively prior to reform and therefore are expected to value IPR reform most.
TL;DR: In this paper, the authors study dating behavior using data from a Speed Dating experiment where they generate random matching of subjects and create random variation in the number of potential partners, finding that women put greater weight on the intelligence and the race of partner, while men respond more to physical attractiveness.
Abstract: We study dating behavior using data from a Speed Dating experiment where we generate random matching of subjects and create random variation in the number of potential partners. Our design allows us to directly observe individual decisions rather than just final matches. Women put greater weight on the intelligence and the race of partner, while men respond more to physical attractiveness. Moreover, men do not value women’s intelligence or ambition when it exceeds their own. Also, we find that women exhibit a preference for men who grew up in affluent neighborhoods. Finally, male selectivity is invariant to group size, while female selectivity is strongly increasing in group size.
TL;DR: The authors show that borrowing constraints emerge as a feature of the optimal long-term lending contract, and that such constraints relax as the value of the borrower's claim to future cash flows increases.
Abstract: There is widespread evidence supporting the conjecture that borrowing constraints have important implications for firm growth and survival. In this paper we model a multiperiod borrowing/lending relationship with asymmetric information. We show that borrowing constraints emerge as a feature of the optimal long-term lending contract, and that such constraints relax as the value of the borrower's claim to future cash flows increases. We also show that the optimal contract has interesting implications for firm dynamics. In agreement with the empirical evidence, as age and size increase, mean and variance of growth decrease, and firm survival increases.
TL;DR: The statement of responsibility on t.p. reads: Xavier Gabaix, Parameswaran Gopikrishnan, Vasiliki Plerou, H. Eugene Stanley.
Abstract: Statement of responsibility on t.p. reads: Xavier Gabaix, Parameswaran Gopikrishnan, Vasiliki Plerou, H. Eugene Stanley
TL;DR: In this article, the authors present an equilibrium theory of the organization of work in an economy where knowledge is an essential input in production and agents are heterogeneous in skill, and they show that improvements in the technology to acquire knowledge lead to opposite implications on wage inequality and organization than reductions in communication costs.
Abstract: We present an equilibrium theory of the organization of work in an economy where knowledge is an essential input in production and agents are heterogeneous in skill. Agents organize production by matching with others in knowledge hierarchies designed to use and communicate their knowledge efficiently. Relative to autarky, organization leads to larger cross-sectional differences in knowledge and wages: low skill workers learn and earn relatively less. We show that improvements in the technology to acquire knowledge lead to opposite implications on wage inequality and organization than reductions in communication costs.
TL;DR: In this paper, a large, statistically significant, and econometrically robust decline in the number of women committing suicide following the introduction of unilateral divorce was found, while no significant effect is found for men.
Abstract: Over the past thirty years changes in divorce law have significantly increased access to divorce. The different timing of divorce law reform across states provides a useful quasi-experiment with which to examine the effects of this change. We analyze state panel data to estimate changes in suicide, domestic violence, and spousal murder rates arising from the change in divorce law. Suicide rates are used as a quantifiable measure of wellbeing, albeit one that focuses on the extreme lower tail of the distribution. We find a large, statistically significant, and econometrically robust decline in the number of women committing suicide following the introduction of unilateral divorce. No significant effect is found for men. Domestic violence is analyzed using data on both family conflict resolution and intimate homicide rates. The results indicate a large decline in domestic violence for both men and women in states that adopted unilateral divorce. We find suggestive evidence that unilateral divorce led to a decline in females murdered by their partners, while the data revealed no discernible effects for men murdered. In sum, we find strong evidence that legal institutions have profound real effects on outcomes within families.
TL;DR: This paper used a door-to-door fundraising field experiment to explore the economics of charity and found that a one standard deviation increase in female solicitor physical attractiveness is similar to that of the lottery incentive.
Abstract: This study develops theory and uses a door-to-door fundraising field experiment to explore the economics of charity. We approached nearly 5000 households, randomly divided into four experimental treatments, to shed light on key issues on the demand side of charitable fundraising. Empirical results are in line with our theory: in gross terms, our lottery treatments raised considerably more money than our voluntary contributions treatments. Interestingly, we find that a one standard deviation increase in female solicitor physical attractiveness is similar to that of the lottery incentive—the magnitude of the estimated difference in gifts is roughly equivalent to the treatment effect of moving from our theoretically most attractive approach (lotteries) to our least attractive approach (voluntary contributions).
TL;DR: In this article, the authors used Swedish data with information on adopted children's biological and adoptive parents to estimate intergenerational mobility associations in earnings and education, and they found that both pre- and post-birth factors contribute to inter-generational earnings.
Abstract: We use unique Swedish data with information on adopted children's biological and adoptive parents to estimate intergenerational mobility associations in earnings and education. We argue that the impact from biological parents captures broad prebirth factors, including genes and prenatal environment, and the impact from adoptive parents represents broad postbirth factors, such as childhood environment. We find that both pre- and postbirth factors contribute to intergenerational earnings and education transmissions, and that prebirth factors are more important for mother's education and less important for father's income. We also find some evidence for a positive interaction effect between postbirth environment and prebirth factors.
TL;DR: In this paper, a theory of the assignment of heterogeneous agents into hierarchical teams was proposed, where less skilled agents specialize in production and more skilled experts specialize in problem solving, and it was shown that globalization increases wage inequality among nonmanagers in the South but not necessarily in the North.
Abstract: How does the formation of cross-country teams affect the organization of work and the structure of wages? To study this question, we propose a theory of the assignment of heterogeneous agents into hierarchical teams, where less skilled agents specialize in production and more skilled agents specialize in problem solving. We first analyze the properties of the competitive equilibrium of the model in a closed economy, and show that the model has a unique and efficient solution. We then study the equilibrium of a two-country model (North and South), where countries differ in their distributions of ability, and in which agents in different countries can join together in teams. We refer to this type of integration as globalization. Globalization leads to better matches for all southern workers but only for the best northern workers. As a result, we show that globalization increases wage inequality among nonmanagers in the South, but not necessarily in the North. We also study how globalization affects the size distribution of firms and the patterns of consumption and trade in the global economy.
TL;DR: In this article, the authors show that there are choice situations in which decision-makers discount lotteries for uncertainty in a manner that cannot be accommodated by standard models of risky choice.
Abstract: Expected utility theory, prospect theory, and most other models of risky choice are based on the fundamental premise that individuals choose among risky prospects by balancing the value of the possible consequences. These models, therefore, require that the value of a risky prospect lie between the value of that prospect’s highest and lowest outcome. Although this requirement seems essential for any theory of risky decision-making, we document a violation of this condition in which individuals value a risky prospect less than its worst possible realization. This demonstration, which we term the uncertainty effect, draws from more than 1000 experimental participants, and includes hypothetical and real pricing and choice tasks, as well as field experiments in real markets with financial incentives. Our results suggest that there are choice situations in which decision-makers discount lotteries for uncertainty in a manner that cannot be accommodated by standard models of risky choice. From the time of Bernoulli on, it has been common to argue that (a) individuals tend to display aversion to the taking of risks, and (b) that risk aversion in turn is an explanation for many observed phenomena in the economic world [Arrow 1971, p. 90].
TL;DR: In this article, a two-dimensional political agency model was developed to predict when an incumbent politician should manipulate the secondary policy to attract voters, and the model was tested by using panel data on environmental policy choices in U.S. states.
Abstract: This paper explores to what extent secondary policy issues are influenced by electoral incentives. We develop a two-dimensional political agency model, in which a politician decides on both a frontline policy issue and a secondary policy issue. The model predicts when the incumbent should manipulate the secondary policy to attract voters. We test our model by using panel data on environmental policy choices in the U. S. states. In contrast to the popular view that secondary policies are largely determined by lobbying, we find that there are strong effects of electoral incentives. I. INTRODUCTION One of the defining features of representative democracies is periodic elections. At the end of each term, voters have the opportunity to reward the incumbent politician with reelection or to replace him with a challenger. This ability of voters to hold the incumbent accountable for his policy choices should in turn act as a powerful incentive instrument for politicians to conduct policies that voters reward with reelection. While there is some consensus that the disciplining effect of elections has an impact on “frontline” policy issues such as the level of government spending or the degree of income and wealth redistribution, there is widespread skepticism whether secondary policy issues, which substantially affect only small groups in society, are influenced by electoral incentives. Typical examples of such secondary policy issues are environmental policy, gun control, foreign aid, or trade policy. This view is fueled by two main arguments. First, political competition is inherently multidimensional—politicians decide on a range of policy issues during each term in office. In the election, however, voters only have the binary option of retaining the incumbent or replacing him with a challenger. Voters are therefore unable to separately sanction specific policy choices of the incumbent. Second, given the multi
TL;DR: This paper found that after losing in arbitration, arrest rates and average sentence length decline, and crime reports rise relative to when they win, and these declines are larger when the awarded wage is further from the police union's demand.
Abstract: Several theories suggest that pay raises below a reference point will reduce job performance. Final offer arbitration for police unions provides a unique opportunity to examine these theories, as the police officers either receive their requested wage or receive a lower one. In the months after New Jersey police officers lose in arbitration, arrest rates and average sentence length decline, and crime reports rise relative to when they win. These declines in performance are larger when the awarded wage is further from the police union's demand. The findings support the idea that considerations of fairness, disappointment, and, more generally, reference points affect workplace behavior.
TL;DR: In this paper, the authors show that the temporary introduction of a minimum wage leads to a rise in subjects' reservation wages which persists even after the minimum wage has been removed, suggesting that the employment effects of removing the Minimum Wage are significantly smaller than are the effects of its introduction.
Abstract: In a laboratory experiment we show that minimum wages have significant and lasting effects on subjects’ reservation wages. The temporary introduction of a minimum wage leads to
a rise in subjects’ reservation wages which persists even after the minimum wage has been removed. Firms are therefore forced to pay higher wages after the removal of the minimum wage than before its introduction. As a consequence, the employment effects of removing the
minimum wage are significantly smaller than are the effects of its introduction. The impact of minimum wages on reservation wages may also explain the anomalously low utilization of subminimum wages if employers are given the opportunity of paying less than a minimum wage previously introduced. It may further explain why employers often increase workers' wages after an increase in the minimum wage by an amount exceeding that necessary for compliance with the higher minimum. At a more general level, our results suggest that economic policy may affect people’s behavior by shaping the perception of what is a fair transaction and by creating entitlement effects.
TL;DR: This article found that mutual fund recommendations are correlated with past advertising in three personal finance publications but not in two national newspapers, and that positive mentions significantly increase fund inflows, but do not successfully predict returns, suggesting that the cost of advertising bias to readers is small.
Abstract: The independence of editorial content from advertisers' influence is a cornerstone of journalistic ethics. We test whether this independence is observed in practice. We find that mutual fund recommendations are correlated with past advertising in three personal finance publications but not in two national newspapers. Our tests control for numerous fund characteristics, total advertising expenditures, and past mentions. While positive mentions significantly increase fund inflows, they do not successfully predict returns. Future returns are similar for the funds we predict would have been mentioned in the absence of bias, suggesting that the cost of advertising bias to readers is small.
TL;DR: The authors examined how people form social networks among their peers and found that the expected value of interacting with an unknown person is low (making traveling solely to meet new people unlikely), while the benefits from interacting with the same person repeatedly are high.
Abstract: We examine how people form social networks among their peers. We use a unique data set that tells us the volume of email between any two people in the sample. The data are from students and recent graduates of Dartmouth College. First-year students interact with peers in their immediate proximity and form long-term friendships with a subset of these people. This result is consistent with a model in which the expected value of interacting with an unknown person is low (making traveling solely to meet new people unlikely), while the benefits from interacting with the same person repeatedly are high. Geographic proximity and race are greater determinants of social interaction than are common interests, majors, or family background. Two randomly chosen White students interact three times more often than do a Black student and a White student. However, placing the Black and White student in the same freshman dorm increases their frequency of interaction by a factor of three. A traditional “linear in group means” model of peer ability is only a reasonable approximation to the ability of actual peers chosen when we form the groups around all key factors including distance, race and cohort.
TL;DR: Greenstone et al. as mentioned in this paper found that the most affected OTC firms had abnormal excess returns ranging between 11.5 and 22.1 percent in the period between when the legislation was initially proposed and when it went into force.
Abstract: Author(s): Greenstone, Michael; Oyer, Paul E; Vissing-Jorgensen, Annette | Abstract: The 1964 Securities Acts Amendments extended the mandatory disclosure requirements that had applied to listed firms since 1934 to large firms traded Over-the-Counter (OTC). We find several pieces of evidence indicating that investors valued these disclosure requirements, two of which are particularly striking. First, a firm-level event study reveals that the OTC firms most affected by the 1964 Amendments had abnormal excess returns of about 3.5 percent in the weeks immediately surrounding the announcement that they had begun to comply with the new requirements. Second, we estimate that the most affected OTC firms had abnormal excess returns ranging between 11.5 and 22.1 percent in the period between when the legislation was initially proposed and when it went into force. These returns are adjusted for the standard four factors and are relative to NYSE/AMEX firms, matched on size and book-to-market equity, that were unaffected by the legislation. While we cannot determine how much of shareholders' gains were a transfer from insiders of these same companies, our results suggest that mandatory disclosure causes managers to focus more narrowly on maximizing shareholder value.
TL;DR: The effects of a large randomized field experiment, carried out with H&R Block, offering matching incentives for IRA contributions at the time of tax preparation was analyzed in this paper, where 15,000 clients were randomly offered a 20 percent match on IRA contributions, a 50 percent match, or no match (the control group).
Abstract: This paper analyzes the effects of a large randomized field experiment, carried out with H&R Block, offering matching incentives for IRA contributions at the time of tax preparation. About 15,000 H&R Block clients, in 60 offices in predominantly low- and middle-income neighborhoods in St. Louis, were randomly offered a 20 percent match on IRA contributions, a 50 percent match, or no match (the control group). [© Brookings Institute]
TL;DR: This paper found that children who can count on support from altruistic parents may not try hard to succeed in the labor market and that parental altruism makes withdrawal of such support non-credible.
Abstract: Children who can count on support from altruistic parents may not try hard to succeed in the labor market. Moreover, parental altruism makes withdrawal of such support non-credible. To promote work ...
TL;DR: The authors found that 25 basis point increases in assumed long-term rates of return are associated with 5 percent increases in equity allocations, and that changes in assumed returns, in turn, influence pension plan asset allocations.
Abstract: Managers appear to manipulate firm earnings through their characterizations of pension assets to capital markets and alter investment decisions to justify, and capitalize on, these manipulations. Managers are more aggressive with assumed long-term rates of return when their assumptions have a greater impact on reported earnings. Firms use higher assumed rates of return when they prepare to acquire other firms, when they are near critical earnings thresholds, and when their managers exercise stock options. Changes in assumed returns, in turn, influence pension plan asset allocations. Instrumental variables analysis indicates that 25 basis point increases in assumed rates are associated with 5 percent increases in equity allocations.