ENERGY USE AND TEMPERATURE HABITUATION: EVIDENCE FROM HIGH FREQUENCY THERMOSTAT USAGE DATA

Using micro‐level thermostat data from 27,000 U.S. households, we analyze how home heating/cooling decisions respond to weather. Responses are greater for extreme heat than for extreme cold and persist for at least 30 days after exposure, due in part to transaction costs but also to changes in intrinsic preferences. Failure to understand habit can lead us to overestimate the impact of short‐term policy nudges but underestimate the long‐run impact of small changes. Higher frequency estimates of how behavior responds to weather improve our understanding of climate adaptation as climate change affects not only mean temperatures but also variances. (JEL C55, D03, Q4)     

WORKFORCE COMPOSITION AND FIRM PRODUCTIVITY: EVIDENCE FROM TAIWAN

We study the relationship between workforce composition and firm productivity based on a new employee‐employer‐matched data set, using an array of workforce characteristics and three alternative measures of firm productivity. While firm age is not essential for the performance of firms, those of smaller size and those in the steel and transportation industries outperform others. Moreover, labor quality, particularly the middle‐aged with higher education, contributes significantly to firms' productivity. Furthermore, economic incentives and market competition both play important roles in the performance of firms. Finally, there is an employer‐size premium with larger firms paying higher wages and nonwage benefits. (JEL C33, D20, J30)     

NUMERACY AND ON-THE-JOB PERFORMANCE: EVIDENCE FROM LOAN OFFICERS

We examine how the numeracy level of employees influences their on-the-job performance. Based on an administrative dataset of a retail bank we relate the performance of loan officers in a standardized math test to the accuracy of their credit assessments of small business borrowers. We find that loan officers with a high level of numeracy are more accurate in assessing the credit risk of borrowers. The effect is most pronounced during the precrisis credit boom period when it is arguably more difficult to pick out risky borrowers. (JEL G21, J24)     

INEQUALITY AND TRUST: NEW EVIDENCE FROM PANEL DATA

We estimate the causal link from income inequality to generalized trust by reconsidering the country‐level evidence on this issue. First, we exploit the panel dimension of the data, thus controlling for any country unobservable time‐invariant variables, and find a negative relationship between the two variables that holds only for developed countries. Second, we focus on these advanced economies and provide instrumental variable estimates using the predicted exposure to technological change as an exogenous driver of inequality. According to our findings, the negative causal effect of inequality on trust is even larger than that coming from ordinary least squares estimation. We also provide new insights on the effects of different dimensions of inequality, exploiting measures of both static inequality—such as the Gini index and top income shares—and dynamic inequality—proxied by intergenerational income mobility. (JEL D31, O15, Z13)     

RACE AND EMPLOYMENT OUTCOMES: EVIDENCE FROM NBA COACHES

We study the impact of management diversity on employment outcomes using data on NBA head coaches that includes information on the race of each coach and his supervisor. We find that a supervisor is more likely to hire a coach of his own race. We also find that black coaches are less likely to be rehired to a second job within three years than their white counterparts, and that a head coach's race affects the quality of the opportunities he is offered. These findings are stronger for first-time coaches than experienced coaches, suggesting that observable information on performance mitigates bias. (JEL J0, J4, J7)     

BUDGET COMMITTEE AND INTERGOVERNMENTAL TRANSFER: EVIDENCE FROM SOUTH KOREA

This paper revisits the claim that members of legislative committees direct more earmark spending to their constituents. In South Korea's legislature, a national law regulating the budget committee provides an unusual source of exogenous variation in membership: members of the committee are rotated each year owing to 1-year term limits. Using data from 226 local governments, and both within-district and within-member variations in membership, we find that districts represented by a budget committee member secure roughly 3% more subsidies than those represented by a nonmember. (JEL D72, D78, H70)     

INPUT TRADE LIBERALIZATION AND MARKUP DISTRIBUTION: EVIDENCE FROM CHINA

We utilize an unprecedented liberalization episode in China, namely its World Trade Organization accession, to estimate the impact of trade liberalization on firm markup and markup distribution. Using a panel data quantile regression, we show that the impact of tariff reduction on markup can be heterogeneous to different firms, resulting in an unevenly distributed markup change across firms. In particular, reduction in output tariff reduces markup and markup dispersion, while reduction in input tariff increases markup and markup dispersion. (JEL F12, F13)     

DECENTRALIZATION AND PUBLIC PROCUREMENT PERFORMANCE: NEW EVIDENCE FROM ITALY

We exploit a new dataset based on European Union (EU) procurement award notices to investigate the relationship between the degree of centralization of public procurement and its performance. We focus on the case of Italy, where all levels of government, along with a number of other public institutions, are involved in procurement and are subject to the same EU regulation. We find that (a) municipalities and utilities, which currently award among the largest shares of contracts, achieve lower rebates than other institutional categories; and (b) decentralization implies lower rebates only when it comes with weak competences of procurement officials. The evidence seems to suggest that a reorganization of the procurement system, both in terms of partial centralization and increased professionalization of procurement officials, would help improve award-stage procurement performance. (JEL H11, H57, H71, H77)     

AUDIT STATE DEPENDENT TAXPAYER COMPLIANCE: THEORY AND EVIDENCE FROM COLOMBIA

We develop and analyze a dynamic model of individual taxpayer compliance choice that predicts “audit state dependent taxpayer compliance,” by distinguishing between forward-looking versus myopic versus naïve behavior. We then test experimentally the audit state dependent model by reporting the results from the first tax compliance experiment run in Colombia. We find that subjects' compliance rates increase with greater enforcement. We also find more novel results: fine rates should be increased after an audit, and “nudging” myopic individuals toward reporting a constant rather than a fluctuating proportion of income would benefit both the taxpayer and the tax authority.(JEL H26, C91)     

RISK PREFERENCES AND EXPECTED UTILITY: EVIDENCE FROM LABOR SUPPLY DATA

This paper adds to the growing body of evidence that observed risk preferences are not consistent with expected‐utility theory. Using the link between labor supply decisions and utility as outlined by Chetty (“A Bound on Risk Aversion Using Labor Supply Elasticities.” The American Economic Review, 96(5), 2006, 1821–34), I compute the curvature of utility over wealth for 3,900 individuals in the 1996 Panel Study of Income Dynamics. I then compare this estimate to a measure of relative risk aversion based on the respondents' answers to hypothetical gambling questions and find virtually zero correlation. Finally, I investigate how the two measures and their correlations change by demographic groups and risky behavior. (JEL C81, D80, J22)     

SCHOOL QUALITY AND INFORMATION DISCLOSURE: EVIDENCE FROM THE HOUSING MARKET

In this article, we investigate the relationship between school quality and information disclosure in housing markets. When presented with the option of identifying their local public school in a real estate listing, we find that sellers with homes assigned to higher‐performing schools are more likely to provide this information. We find more evidence of selective disclosure in 2001–2002 than in 2006–2007, when the costs of gathering and disclosing information on school assignments and quality were lower. Furthermore, we find more evidence of strategic behavior among sellers of large single‐family units that presumably appeal to families with children. After controlling for school quality, information disclosure does not appear to affect housing prices. Taken together, our results support the findings of the education literature on the importance of school quality capitalization in residential real estate and they provide the first evidence of strategic information disclosure in housing markets. (JEL L15, I20, R31)     

POLITICAL IDEOLOGY AND ECONOMIC GROWTH: EVIDENCE FROM THE FRENCH DEMOCRACY

We provide a test of the impact of voters' political ideology on economic growth and of the role of preferences for government size as a transmission channel. We focus on France from the beginning of its stable democratic experience in 1871. A move of voters' ideology to the right increases economic growth over the total observation period. However, the growth effect of ideology is mediated by voters' preferences for government size only during the post‐World War II period. For reverse causality concerns, we use the political ideology of other historical democracies as an instrument variable for France's ideology. (JEL E6, O43, H11)     

FINANCIAL RESTRAINTS AND PRIVATE INVESTMENT: EVIDENCE FROM A NONSTATIONARY PANEL

We employ recently developed panel data methods to estimate a model of private investment under financial restraints for 20 developing countries using annual data for 1972–2000. We show that the qualitative nature of the results varies depending on whether we take into account cross‐country effects. When we allow for cross‐sectional dependence, investment displays more sensitivity to world capital market conditions and exchange rate uncertainty. A perhaps even more surprising result is the finding that countries that managed to suppress domestic real interest rates without generating high inflation enjoyed higher levels of private investment than those that would have been obtained under liberalized conditions. (JEL O16, G18, G28)     

CREDIT CONSTRAINTS AND LABOR SUPPLY: EVIDENCE FROM BANK BRANCHING DEREGULATION

This paper examines labor supply adjustment-both at the intensive and extensive margins-following financial market development. Specifically, we exploit the staggered passage of bank branching deregulation in the United State to study the impact of relaxing credit constraints on labor supply decisions. We find strong evidence that improvements in how credit markets function decrease weekly hours worked, and that the effect is most significant for the lower-middle (marginal) income group. Furthermore, we observe heterogeneous responses across demo graphic groups (race and income). In contrast, we find little to no evidence that deregulation has a significant impact on the extensive margin of participation.     

URBAN TRANSPORT AND CRIME: EVIDENCE FROM UNANTICIPATED MASS TRANSIT STRIKES

We examine the effects of mass transit strikes on criminal behavior in Los Angeles County utilizing a unique dataset of reported crimes between 2000 and 2007. Geocoded location and time information pertaining to each offense accommodates a fine grained difference‐in‐differences panel data analysis. We find that in locations affected by the strike, aggravated assaults rose by 18.7% while aggregate property crimes increased by 5.7%, relative to their mean. This increase in crime was disproportionately larger in lower income neighborhoods, which report higher usage of mass transit, suggesting local isolation of both criminals and victims as a mechanism. (JEL J52, K42, K31)     

LOSS AVERSION AND MANAGERIAL DECISIONS: EVIDENCE FROM MAJOR LEAGUE BASEBALL

Previous research indicates that management changes are important events for organizations, partly because they lead to reversals of poor prior decisions. An unanswered question is why replacing the manager seems to be necessary for reversing poor decisions. One explanation is that managers have an irrational behavioral aversion to admitting mistakes (loss aversion). We test this hypothesis with a research design that mitigates many of the measurement problems associated with investment decisions in traditional corporate settings, and that allows us to distinguish agency cost from loss aversion as explanations. Using Major League Baseball data, we find that new managers, compared to continuing managers, are more likely to divest low‐performing players. Moreover, when the manager is new and the previous manager was responsible for acquiring a player who is underperforming, the likelihood of player divestiture is significantly higher relative to low performers acquired by earlier managers. Experience of the acquiring manager does not affect the likelihood that the manager retains a low performer, suggesting that it is loss aversion, and not career concerns, that motivates acquiring managers to retain low performers. The findings suggest that loss aversion plays a significant role in managerial decisions and managerial turnover. (JEL J6, L8, D8)     

COMPETITION AND BIDDING BEHAVIOR: SOME EVIDENCE FROM THE RICE MARKET

When objects have uncertain value, the net effect of competition in sealed-bid auctions is ambiguous. The risk of succumbing to the "winner's curse" generally causes bidders to exhibit a non-aggressive response in addition to the standard competitive effect. Sellers can influence the size of the nonaggressive effect by responding to the value uncertainty. This paper focuses specifically on individual bidding behavior in a rice auction market in which sellers issue a product-quality guarantee. The empirical evidence supports my hypothesis that such a guarantee negates the significance of the nonaggressive bidder response.     

THE LONDON BOMBINGS AND RACIAL PREJUDICE: EVIDENCE FROM THE HOUSING AND LABOR MARKET

This paper investigates the impact of the London bombings on attitudes toward ethnic minorities, examining outcomes in housing and labor markets across London boroughs. We use a difference‐in‐differences approach, specifying “treated” boroughs as those with the highest concentration of Asian residents. Our results indicate that house prices in treated boroughs fell by approximately 2% in the 2 years after the bombings relative to other boroughs, with sales declining by almost 6%. Furthermore, we present evidence of a rise in the unemployment rate in treated compared to control boroughs, as well as a rise in racial segregation. (JEL J15, J71, R21)     

SENTIMENT BIAS AND ASSET PRICES: EVIDENCE FROM SPORTS BETTING MARKETS AND SOCIAL MEDIA

Previous research using attendance‐based proxies for sentiment bias in sports betting markets confirmed the presence of investor sentiment in these markets. We use data from social media (Facebook “Likes”) to proxy for sentiment bias and analyze variation in bookmakers' prices investor sentiment. Based on betting data from seven professional sports leagues in Europe and North America, we find evidence that bookmakers increase prices for bets on teams with relatively more Facebook “Likes,” indicating the presence of price‐insensitive investors with sentiment bias. These price changes do not affect informational efficiency in this market. (JEL L81, G14)     

STRICT PRODUCT LIABILITY AND SAFETY: EVIDENCE FROM THE GENERAL AVIATION MARKET

This paper examines the impact of a strict product liability standard on the accident rate in the general aviation (GA) industry. Liability expenses increased by 775% between 1976 and 1986, reducing the sales of new GA aircraft by 90% and increasing the age of the GA fleet. Using both aggregate and model‐specific data, our results indicate that the increase in the age of the GA fleet increased the accident rate by 25%–35% during 1981–2000. In addition, the higher price of GA aircraft boosted sales of homebuilt planes, which have higher accident and fatality rates than GA aircraft. (JEL K13, L62, L15)