does financial education impact financial literacy and financial behavior and if so when in a meta analysis of 126 impact evaluation studies we find that financial education significantly impacts financial behavior and to an even larger extent financial literacy these results also hold for the subsample of randomized experiments rcts however intervention impacts are highly heterogeneous financial education is less effective for low income clients as well as in low and lower middle income economies specific behaviors such as the handling of debt are more difficult to influence and mandatory financial education tentatively appears to be less effective thus intervention success depends crucially on increasing education intensity and offering financial education at a teachable moment

information school choice and academic achievement evidence from two experiments we examine a natural experiment and a field experiment that provided direct information on school test scores to lower income families in a public school choice plan receiving information significantly increases the fraction of parents choosing higher performing schools parents with high scoring alternatives nearby were more likely to choose nonguaranteed schools with higher test scores using random variation from each experiment we find that attending a higher scoring school increases student test scores the results imply that school choice will most effectively increase academic achievement for disadvantaged students when parents have easy access to test score information and good options from which to choose

share contracts and their rationale lessons from marine fishing most of the existing literature on share contracts is based explicitly or implicitly on agriculture a sector in which share contracts are seldom dominant and apparently on the decline moreover since agricultural activities have some rather special characteristics the purpose of the present article is to analyse contractual choice and especially the choice of share contracts in a sector in which share contracts are dominant namely fishing in the process of explaining the dominance of share contracts in fishing the article also explains a some heretofore neglected features of these share contracts such as the way in which shares are calculated and the treatment of repair and maintenance expenditures b the nature and extent of interlinked transactions c the exceptional cases where share contracts are not used and d the relevance of varying environmental conditions and especially those of poor developing countries to the nature of contracts in fishing and to the differences therein between

prospect theory and the risk return association another look abstract in a seminal study fiegenbaum 1990 attempted to set down parameters of relationship between risk and return for firms and related it to two piece von neumann morgenstern utility function first explored empirically by fishburn and kochenberger 1979 i re examine the estimated relationship specifically i perform a meta analysis of the above and below median returns to show that the relationship between risk and return is weaker above median than below median i also show that the relationship between below median returns and above median returns is very small exhibiting compartmentalization of decision making by the firms similar to individual decision makers

strategic price complexity in retail financial markets abstract there is mounting empirical evidence to suggest that the law of one price is violated in retail financial markets there is significant price dispersion even when products are homogeneous also despite the large number of firms in the market prices remain above marginal cost and may even rise as more firms enter in a non cooperative oligopoly pricing model i show that these anomalies arise when firms add complexity to their price structures complexity increases the market power of the firms because it prevents some consumers from becoming knowledgeable about prices in the market in the model as competition increases firms tend to add more complexity to their prices as a best response rather than make their disclosures more transparent because this may substantially decrease consumer surplus in these markets such practices have important welfare implications

tournaments and sharecropping this paper explores the incentive effects of a renewal clause in a lease the basis of selection is rank order performance the authors findings in the context of a principal agent model are as follows in order to extract greater effort from tenants i e agents the landlord the principal must commit to a reward scheme that provides a part of the second period income to the winner on the basis of past performance this payment provides insurance and creates incentives for agents to work harder in the current period it also makes the contract efficient ex post and renegotiation proof copyright 1996 by the london school of economics and political science

wealth effects distribution and the theory of organization abstract we construct a general equilibrium model of firm formation in which organization is endogenous firms are coalitions of agents providing effort and investment capital effort is unobservable unless a fixed monitoring cost is paid and borrowing is subject to a costly state verification problem because incentives vary with an agent s wealth different types of agents become attractive firm members under different circumstances when borrowing is not costly firms essentially consist of one type of agent and are organized efficiently but when the costly state verification problem is sufficiently severe firm organization will depend on the distribution of wealth with enough inequality it will tend to be dictated by incentives of rich agents to earn high returns to wealth even if the chosen organizational form is not a technically efficient way to provide incentives journal of economic literatureclassification numbers d2 d31 j41 l2

financial risk perception are individuals variance averse or loss averse abstract finance theory tends to see risk as related to variance in expected returns whereas the psychology literature tends to link risk to probability or size of potential losses this paper investigates whether individuals perceptions of risk are linked to variance aversion or loss aversion and finds that a link to loss aversion is supported

the economic theory of agrarian institutions introduction alternative approaches to the theory of institutions in economic development pranab bardhan rational peasants efficient institutions and a theory of rural organization methodological remarks for development economics joseph e stiglitz part 1 land and labour theories of sharecropping nirvikar singh a comparison of principal agent and bargaining solutions the case of tenancy contracts clive bell contracts with eviction in infinitely repeated principal agent relationships bhaskar dutta et al production relations in semi arid african agriculture hans binswanger et al part 2 credit and interlinked transactions rural credit markets the structure of interest rates exploitation and efficiency kaushik basu credit and agrarian class structure mukesh eswaran and ashok kotwal credit rationing tenancy productivity and the dynamics of inequality avishay braverman and joseph e stiglitz on choice among creditors and bonded labour contracts t n srinivasan some aspects of linked product and credit market contracts among risk neutral agents clive bell and t n srinivasan a note on interlinked rural economic arrangements pranab bardhan interlinkages and the pattern of competition debraj ray and kunal sengupta part 3 marketing and insurance agricultural institutions for insurance and stabilization david m newbery peasants risk aversion and the choice of marketing intermediaries and contracts a bargaining theory of equilibrium marketing contracts pinhas zusman part 4 co operatives technology and the state agricultural producer co operatives louis putterman institutional analysis of credit co operatives avishay braverman and j luis guasch agrarian structure technological innovations and the state alain de janvry et al

behavioral biases of mutual fund investors we examine the effect of behavioral biases on the mutual fund choices of a large sample of us discount brokerage investors using new measures of attention to news tax awareness and fund level familiarity bias in addition to behavioral and demographic characteristics of earlier studies behaviorally biased investors typically make poor decisions about fund style and expenses trading frequency and timing resulting in poor performance furthermore trend chasing appears related to behavioral biases rather than to rationally inferring managerial skill from past performance factor analysis suggests that biased investors often conform to stereotypes that can be characterized as gambler smart overconfident narrow framer and mature

a theory of interlinked rural transactions this paper argues that the interlinking of labor output and credit contracts often observed in rural economies can be regarded as an attempt to improve allocative efficiency in the face of moral hazard it advances an economic explanation of the phenomenon which is rooted in the view that prevalent modes of transaction of which interlinked contracts are an example are shaped by technological considerations interlinking is shown to be an efficient economic response to unequally distributed information arising from the uncertainty which characterizes subsistence agriculture all pareto efficient allocations require a combination of wage cum output sharing with consumption credit contracts the analytical framework set up to demonstrate the results is used to examine the response of the contractual parameters to changes in i the returns to alternative occupations available to tenant laborers ii the cost of credit to the village economy and iii the riskiness of cultivation the analysis concludes that public policy to alleviate rural poverty must recognize the relationships between technological considerations and modes of transaction in the absence of a complete set of markets

borrowing high versus borrowing higher price dispersion and shopping behavior in the u s credit card market we document substantial cross individual dispersion in u s credit card borrowing costs even after controlling for borrower risk and card characteristics that remaining dispersion arises because cross lender pricing heterogeneity generates dispersion in annual percentage rate apr offers to borrowers and borrowers vary in shopping intensity our empirics match administrative data to self reported card shopping intensity and use instruments suggested by fair lending law to account for the endogeneity between aprs and search the results show that shoppers versus nonshoppers pay aprs as different as those paid by borrowers in the best versus worst credit score deciles we discuss implications for policy and practice

labor tying in a poor agrarian economy a theoretical and empirical analysis in this paper we show how tied labor contrary to its common characterization as a feudal relic and as a symptom of economic stagnation may actually be strengthened by capitalist agricultural development we construct a simple two period theoretical model of a two tiered labor market to show how the proportional importance of voluntary labor tying contracts may increase with yield increasing improvements and with a tightening of the labor market we then provide in support of these hypotheses some general historical as well as more detailed econometric evidence from a variety of cross sectional data in rural india

efficiency and equity tradeoffs incentive compatible contracts revisited abstract while the efficiency of certain contractual choices has been well established less attention has been given to the distributional outcomes of contracting in natural resource based industries data from a case study of seed gatherers in honduras demonstrates that workers paid under a relative payment system receive an earnings premium of about 25 of which 40 cannot be explained by observed differences in worker productivity a theoretical agency model is outlined in the appendix to explain why workers under tournaments necessarily enjoy a higher return than those under piece rates implying a more skewed income distribution as suggested in the efficiency wage literature

coarse thinking and persuasion we present a model of uninformative persuasion in which individuals think coarsely they group situations into categories and apply the same model of inference to all situations within a category coarse thinking exhibits two features that persuaders take advantage of i transference whereby individuals transfer the informational content of a given message from situations in a category where it is useful to those where it is not and ii framing whereby objectively useless information influences individuals choice of category the model sheds light on uninformative advertising and product branding as well as on some otherwise anomalous evidence on mutual fund advertising

up close and personal investor sophistication and the disposition effect this paper analyzes the trading records of a major discount brokerage house to investigate the disposition effect the tendency to sell stocks that have appreciated in price winners sooner than stocks that trade below the purchase price losers in contrast to previous research that has demonstrated the disposition effect by aggregating across investors our main objective is to identify differences in the disposition bias across individuals and explain this in terms of underlying investor characteristics building on the findings in experimental economics and social psychology we hypothesize that differences in investor literacy about financial markets and trading frequency are responsible in part for the variation in individual disposition effect using demographic and socioeconomic variables as proxies for investor literacy we find empirical evidence that wealthier individuals and individuals employed in professional occupations exhibit a lower disposition effect consistent with experimental economics trading frequency also tends to reduce the disposition effect we provide guidelines for investment advisors regulators and investment communities to utilize our findings and help investors make better decisions

costly search and mutual fund flows this paper studies the flows of funds into and out of equity mutual funds consumers base their fund purchase decisions on prior performance information but do so asymmetrically investing disproportionately more in funds that performed very well the prior period search costs seem to be an important determinant of fund flows high performance appears to be most salient for funds that exert higher marketing effort as measured by higher fees flows are directly related to the size of the fund s complex as well as the current media attention received by the fund which lower consumers search costs

investor attention overconfidence and category learning abstract motivated by psychological evidence that attention is a scarce cognitive resource we model investors attention allocation in learning and study the effects of this on asset price dynamics we show that limited investor attention leads to category learning behavior i e investors tend to process more market and sector wide information than firm specific information this endogenous structure of information when combined with investor overconfidence generates important features observed in return comovement that are otherwise difficult to explain with standard rational expectations models our model also demonstrates new cross sectional implications for return predictability

prospect theory and the risk return association an empirical examination in 85 industries a new sample of 85 industries about 3 300 firms defined in terms of homogenous products provides strong evidence that prospect theory can explain the tradeoff between two of the most researched parameters in evaluating organizations namely risk and return in particular organizations below their target level are found to be risk takers hl while organizations above their target level are risk averters h2 moreover the below target tradeofl was generally steeper than the above target with a median below to above slope ratio of about 3 l h3 risk and return are probably the two single parameters most researched by the various and related disciplines of economics finance and management although each one of them has looked at these two parameters from different aspects and for different purposes they have provided a wide understanding of these two factors in the contest of the theory of the firm the purpose of this study is to look closely at the relationship between these two important parameters in order to understand firm s competitive behavior using the recent development in behavioral decision theory namely prospect theory kahneman and tversky 1979 although march 1988 has criticized the discipline of management for its later adaptation in considering risk elements for evaluating organization performance and decision making processes recent studies e g bettis 1981 rumelt 1974 singh 1986 jemison 1987 and baird and thomas 1986 have paid considerable attention to risk aspects in evaluating the performance of firms in general these studies have concluded that the characteristics of the firms environment strategy and implementation processes have significant and important influence on the firm s risk level and its associated rate of return bowman 1980 has looked closely at 85 u s industries and explored the

interlocking transactions obstacles precursors or instruments of agrarian capitalism abstract rural labor arrangements often change rapidly and in ways that prevailing theories cannot explain explicit understanding of the exercise of power in rural society sheds considerable light on how and why rural labor arrangements change in the course of economic development this paper shows how different labor tying arrangements embody exclusionary mechanisms that can serve as instruments of both labor management and social control macro political and economic conditions shape the ways in which these mechanisms operate and are in turn influenced by them viewing labor arrangements in this way helps resolve problems confronted by the prevailing theories and allows for a broader understanding of dynamic processes

choice of contracts in turkish agriculture sharecropping and fixed rent tenancy have coexisted under extremely diverse settings for centuries from labor abundant south and east asia to land abundant west africa and the americas this fact has intrigued generations of economists since adam smith marshall s lucid exposition of the productive inefficiencies of sharecropping in the principles paved the way for a major effort to reconcile neoclassical theory with the reality of coexistence 1 another substantial segment of the literature condemned sharecropping as an exploitative mechanism in semifeudal societies and predicted its downfall 2 more recent theoretical treatments however hail the share contract as a simple yet ingenious arrangement that guarantees the second best outcome in environments characterized by risk input market imperfections and moral hazard 3 the intuition underlying this argument is widely accepted but has yet to yield a general explanation of the real world coexistence phenomenon nor should we expect such an explanation each country and historical episode has its unique climatic technological and institutional characteristics and different motives for the adoption of share contracts may dominate in different settings 4 it is troublesome in fact that our empirical knowledge is so thin given that our theory of agricultural contracts is so rich 5 one reason of course is that appropriate data are costly and difficult to collectfor contractual choice is stubbornly complex and is best observed at the individual agent or household level there has been empirical work but much of it has examined the well worn marshallian theme is sharecropping less efficient than self cultivation 6 our knowledge of the conditions under which different contracts are likely to arise is limited to a handful of studies on the indian subcontinent or the united states in this article i examine the determinants of contractual choice during the 1970s for samples of individual turkish landlords and tenants the data were drawn from a 1973 survey that was national in

the role of sales agents in information disclosure evidence from a field experiment with a large nationwide retailer we run a natural field experiment to measure the effects of energy use information disclosure customer rebates and sales agent incentives on demand for energy efficient durable goods although a combination of large rebates plus sales incentives substantially increases market share information and sales incentives alone each have zero statistical effect and explain at most a small fraction of the low baseline market share sales agents strategically comply only partially with the experiment targeting information to more interested consumers but not discussing energy efficiency with the disinterested majority these results suggest that seller provided information is not a major barrier to energy efficiency investments at current prices in this context data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2327 this paper was accepted by john list behavioral economics

testing the theory of tournaments an empirical analysis of broiler production broiler chickens are raised by contract growers whose rewards depend explicitly upon relative performance we use data on the performance of broiler producers facing both tournament and linear performance evaluation compensation structures to test three predictions from the theory of tournaments that changes in the level of prizes that leave prize differentials unchanged will not affect performance that in mixed tournaments more able players will choose less risky strategies and that tournament organizers will attempt to handicap players of unequal ability or reduce mixing to avoid the disincentive effects of mixed tournaments our evidence is consistent with each prediction

saving more in groups field experimental evidence from chile abstract we test the impact of a peer group program on savings in a sample of microcredit clients we conduct two randomized trials among these 2687 microcredit clients the first finds that a savings group treatment which combines public goal setting monitoring in the group and non financial rewards increases savings in a new savings account significantly the number of deposits grows 3 7 fold and the average balance almost doubles in contrast a more classical measure a substantially increased interest rate has no effect for most participants and raises the savings balance only for the very top of the distribution a second experiment conducted a year later tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages without meetings rewards or peer pressure given that participants are borrowing at 90 apr we discuss how and when saving more could be harmful or beneficial

do women shy away from competition do men compete too much we examine whether men and women of the same ability differ in their selection into a competitive environment participants in a laboratory experiment solve a real task first under a noncompetitive piece rate and then a competitive tournament incentive scheme although there are no gender differences in performance men select the tournament twice as much as women when choosing their compensation scheme for the next performance while 73 percent of the men select the tournament only 35 percent of the women make this choice this gender gap in tournament entry is not explained by performance and factors such as risk and feedback aversion only playa negligible role instead the tournament entry gap is driven by men being more overconfident and by gender differences in preferences for performing in a competition the result is that women shy away from competition and men embrace it

permanent labour and land tenancy contracts in agrarian economies an integrated analysis extending the existing models of land and labour contracts this study attempts to build a general model of long term agrarian contracts the model implies that where tenancy is an available option the fixed wage permanent labour contract will not be chosen if it is chosen under institutional constraints on tenancy contracts resulting resource allocations will be inefficient empirical relevance of the model is tested on data from the philippines

all s well that ends well on the importance of how returns are achieved we demonstrate that investor satisfaction and investment behavior are influenced substantially by the price path by which the final investor return is achieved in a series of experiments we analyze various different price paths investors are most satisfied if their assets first fall in value and then recover and they are least satisfied with the opposite pattern independent of whether the final return is positive or negative price paths systematically influence risk preferences return beliefs and ultimately trading decisions our results enable a much more holistic perspective on a wide range of topics in finance such as the disposition effect risk taking behavior after previous gains and losses and behavioral asset pricing

rural labor legislation and permanent agricultural employment in northeastern brazil abstract permanent annual or longer term agricultural employment declined relative to temporary daily weekly or seasonal employment during the 1960s in a sugar cane producing region in northeastern brazil but increased rapidly during the 1970s predictions from economic theory are combined with observations about the economic forces at work during the period to argue that in the absence of government intervention permanent employment would likely have risen during both decades the argument renders the introduction of the brazilian rural labor statute rls of 1963 a strong candidate explanation for the decline of permanent employment in the 1960s the rls s employment stability provision which required employers to make severance payments to workers with at least one year tenure dismissed without just cause not only increased the expected cost of permanent contracts but also changed the very nature of permanent employment prior to the legislation employers induced permanent workers to be subject to them by giving them premium wage and benefits packages and threatening to dismiss them if caught shirking in subjection severance pay provisions made such threats incredible the elimination of farmers ability to derive subjection benefits from permanent employees reduced even further the incentive to hire workers under permanent contracts

naive diversification strategies in defined contribution saving plans there is a worldwide trend toward defined contribution saving plans and growing interest in privatized social security plans in both environments individuals are given some responsibility to make their own asset allocation decisions raising concerns about how well they do at this task this paper investigates one aspect of the task namely diversification it is shown that some investors follow the 1 n strategy they divide their contributions evenly across the funds offered in the plan consistent with this naive notion of diversification it is found that the proportion invested in stocks depends strongly on the proportion of stock funds in the plan

capitalism and kinship do institutions matter in the labor market this study examines the determination of employment and pay on capitalist and kinship vessels in the new england fishing industry capitalist vessels resemble standard competitive firms in the way that employment and pay respond to changing market conditions kinship vessels operate under work guarantees and income sharing rules these differences in institutional rules lead to different patterns of income employment growth and labor adjustment the study shows how an understanding of the institutional structure of labor markets can contribute to the design of public policies to facilitate adjustment to change and to promote industrial growth

the long and short of it why are stocks with shorter runs preferred this article examines how consumers process graphical financial information to estimate risk we propose that consumers sample the local maxima and minima of a graph to infer the variation around a trend line which is used to estimate risk the local maxima and minima are more extreme the higher the run length of the stocks the consecutive number of upward or downward movements of a price series with identical mean variance skewness and kurtosis three experiments show that this leads to stocks with higher run lengths being perceived as riskier the run length effect importantly the run length effect is greater for investors who are more educated are employed full time trade more frequently have had longer experience trading and trade a wider range of financial instruments implications for the communication of financial products public policy and consumer welfare are discussed as are theoretical implications for the processing of visual and financial information and behavioral finance

why does the law of one price fail an experiment on index mutual funds we conduct an experiment to evaluate why individuals invest in high fee index funds in our experiments subjects allocate 10 000 across four s p 500 index funds and are rewarded for their portfolio s subsequent return subjects overwhelmingly fail to minimize fees we can reject the hypothesis that subjects buy high fee index funds because of bundled non portfolio services search costs for fees matter but even when we eliminate these costs fees are not minimized instead subjects place high weight on annualized returns since inception fees paid decrease with financial literacy interestingly subjects who choose high fee funds sense they are making a mistake

do security analysts speak in two tongues why do security analysts issue overly positive recommendations we propose a novel approach to distinguish strategic motives e g generating small investor purchases and pleasing management from nonstrategic motives genuine overoptimism we argue that nonstrategic distorters tend to issue both positive recommendations and optimistic forecasts while strategic distorters speak in two tongues issuing overly positive recommendations but less optimistic forecasts we show that the incidence of strategic distortion is large and systematically related to proxies for incentive misalignment our two tongues metric reveals strategic distortion beyond those indicators and provides a new tool for detecting incentives to distort that are hard to identify otherwise

shrouded attributes consumer myopia and information suppression in competitive markets 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

work incentives hierarchy and internal labor markets this paper argues that contracts with payment based on a ranking of employee performance can provide performance incentives even under asymmetric information that prevents payment based on individual performance only being enforceable such contracts also fit with five features of labor markets that have aroused considerable interest 1 hierarchical wage structures 2 internal promotion 3 wage rates that rise with seniority and experience more than productivity 4 the variance of earnings increasing with experience and 5 wage rates attached to jobs rather than individuals with differentials set by administrative procedures rather than by reference to external market wages

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

summing up on the australian case for protection in 1929 a quasi official report by several eminent australian economists the australian tariff an economic inquiry by j b brigden d p copland e c dyason l f giblin and c h wickens set off analytical controversy that has helped shape the discovery of what has come to be known as modern international trade theory i had thought that this whole topic was satisfactorily understood by informed scholars and could be honorably deposited on the shelf of closed history g j manger 1976 has however uncovered some interesting puzzles since marion crawford samuelson who played a key role forty years ago in the theoretical developments is not here to consult on doubtful matters of memory i recently spent an afternoon in the harvard college libraries reviewing the principal scholarly contributions quite aside from manger s interesting issues the exercise was a rewarding one for here is a drama that involved many of the great names of our subject ricardo 1815 1823 and malthus 1815 torrens 1815 and stuart mill 1848 sidgwick 1883 edgeworth 1897 and bastable 1897 and i seem to recall nicholson and carver simon patten 1890 and taussig marshall 1879 and pigou 1906 as well as allyn young 1913 knight 1924 and robertson 1924 brigden 1925 1927a 1927b benham 1926 1927 1935 copland 1931 and frank graham 1923 heckscher 1919 and ohlin 1933 stolper and paul samuelson 1941 samuelson 1938 1939 as well as lerner 1952 and metzler 1949a 1949b karl anderson 1938 1939 and marion crawford samuelson 1939 corden 1957 reitsma 1958 1960 bhagwati and johnson 1961 vanek kemp and ronald jones 1962 and many others the story is worth telling both in its received and revised versions

are investors rational choices among index funds s p 500 index funds represent one of the simplest vehicles for examining rational behavior they hold virtually the same securities yet their returns differ by more than 2 percent per year although the relative returns of alternative s p 500 funds are easily predictable the relationship between cash flows and performance is weaker than rational behavior would lead us to expect we show that selecting funds based on low expenses or high past returns outperforms the portfolio of index funds selected by investors our results exemplify the fact that in a market where arbitrage is not possible dominated products can prosper

kinship ties social networks and segmented labor markets evidence from the construction sector in egypt abstract this paper tests for rationing of entry into craft occupations in the construction labor market in egypt and investigates whether entry is rationed according to regional origin and access to kinship and other social networks i use a modified version of roy s model of occupational choice which allows for the existence of costs of entry into craft occupations data from a 1988 survey of construction workers are used to estimate the model and test for rationing the results confirm the existence of rationing according to a worker s regional background but are inconclusive with respect to kinship ties and social networks

taxpayer confusion evidence from the child tax credit we develop an empirical test for whether households understand or misperceive their marginal tax rate our identifying variation comes from the loss of the child tax credit when a child turns 17 using this age discontinuity we find that despite this tax liability increase being lump sum and predictable households reduce their reported wage income upon discovering they have lost the credit this finding suggests that households misinterpret at least part of this tax liability change as an increase in their marginal tax rate this evidence supports the hypothesis that tax complexity can cause confusion and leads to unintended behavioral responses jel d12 d14 h24 h31

first impressions matter an experimental investigation of online financial advice we explore how individuals assess the quality of financial advice they receive and how they form judgments about advisers using an incentivized discrete choice experiment we show that first impressions matter consumers more often follow advisers who dispense good advice before bad we demonstrate how clients opinions of adviser quality can be manipulated by using an easily replicated confirmation strategy that depends on the quality of the advice and the difficulty and order of the advice topics our results also reveal how clients benefit from their own past experience and how they use professional credentials to guide their choices data as supplemental material are available at https doi org 10 1287 mnsc 2016 2590 this paper was accepted by john list behavioral economics

inferior products and profitable deception we analyse conditions facilitating profitable deception in a simple model of a competitive retail market firms selling homogenous products set anticipated prices that consumers understand and additional prices that naive consumers ignore unless revealed to them by a firm where we assume that there is a binding floor on the anticipated prices our main results establish that bad products those with lower social surplus than an alternative tend to be more reliably profitable than good products specifically 1 in a market with a single socially valuable product and sufficiently many firms a deceptive equilibrium in which firms hide additional prices does not exist and firms make zero profits but perversely 2 if the product is socially wasteful then a profitable deceptive equilibrium always exists furthermore 3 in a market with multiple products since a superior product both diverts sophisticated consumers and renders an inferior product socially wasteful in comparison it guarantees that firms can profitably sell the inferior product by deceiving consumers we apply our framework to the mutual fund and credit card markets arguing that it explains a number of empirical findings regarding these industries

attached farm labor limited horizons and servility abstract two facets of attached farm labor arrangements the servility often required of attached laborers and employers interest in maintaining such workers limited horizons are described and incorporated into an otherwise standard model of attached and temporary agricultural employment substantially modifying the model s predictions the dependence of workers preferences on reference group behavior which underlies employers interest in limiting horizons may enable employers to drive even freely mobile workers wellbeing below competitive levels may imply that abolishing servility arrangements would benefit all workers gives rise to multiple equilibria in community layout and culture and sheds light on some characteristics of agrarian revolts

hot hands in mutual funds short run persistence of relative performance 1974 1988 the relative performance of no load growth oriented mutual funds persists in the near term with the strongest evidence for a one year evaluation horizon portfolios of recent poor performers do significantly worse than standard benchmarks those of recent top performers do better though not significantly so the difference in risk adjusted performance between the top and bottom octile portfolios is six to eight percent per year these results are not attributable to known anomalies or survivorship bias investigations with a different previously used data set and with some post 1988 data confirm the finding of persistence

financial literacy financial education and downstream financial behaviors policy makers have embraced financial education as a necessary antidote to the increasing complexity of consumers financial decisions over the last generation we conduct a meta analysis of the relationship of financial literacy and of financial education to financial behaviors in 168 papers covering 201 prior studies we find that interventions to improve financial literacy explain only 0 1 of the variance in financial behaviors studied with weaker effects in low income samples like other education financial education decays over time even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention correlational studies that measure financial literacy find stronger associations with financial behaviors we conduct three empirical studies and we find that the partial effects of financial literacy diminish dramatically when one controls for psychological traits that have been omitted in prior research or when one uses an instrument for financial literacy to control for omitted variables financial education as studied to date has serious limitations that have been masked by the apparently larger effects in correlational studies we envisage a reduced role for financial education that is not elaborated or acted upon soon afterward we suggest a real but narrower role for just in time financial education tied to specific behaviors it intends to help we conclude with a discussion of the characteristics of behaviors that might affect the policy maker s mix of financial education choice architecture and regulation as tools to help consumer financial behavior this paper was accepted by uri gneezy behavioral economics

justice to the australians my acknowledged debt to gary j manger is so great that i fear to register any dissent lest i seem an ingrate therefore i stay with a few truths that relate to his concerns 1 1 by 1920 it was high time to replace the labor only model of ricardo mill classicism by the formal ohlin haberler and other multi factor extensions already ricardo torrens and malthus recognized that the corn laws could raise landowners share in english national income a phenomenon not relevant to the 1 factor only formal model the 1925 1931 australian discussions similarly deviated into good sense before international trade theory had in manger s happy phrase shifted intellectual gears tom kuhn must realize that in real life scientists work with more than one paradigm at a time including some still getting born and perceived 2 ohlin s recognition of oversimplification in purchasingpower theory will be seen on reflection to be logically and empirically unrelated to the inadequacies of the labor only models similarly mill s recognition that international values cannot accord with labor values is not a point against a model involving labor alonein each country it is a valid deduction about such a classical model in short as kuhn can document a new and better paradigm may be motivated by criticisms of an old paradigm that are themselves confused and even wrong 3 frederic benham s 1935 paper on how factor prices and goods prices are related is a quantum advance in the post heckscher literature his jousts with bridgen on marion samuelson s problem do not win for him from me manger s high marks but when have teachers been unanimous in making out report card grades 4 manger earns our praise for throwing new light on basic advances in the theory of international trade my reservations which are minor hope to guard against awarding excessive credit to post1938 writers

trade protectionism in australia its growth and dismantling protection from import competition was a defining feature of the birth of the australian federation in 1901 for the next 70 years the extent of protection grew and broadened from mainly tariffs to also involving import licencing after world war ii there was a one off 25 across the board cut in tariffs in 1973 and some dismantling of agricultural subsidies but that was followed by the re imposition of import quotas for the most protected manufactured goods then in the mid 1980s a new reformist government began a long process of dismantling all protection as part of an overall economic reform program that also involved de regulation privatization and moving to a flexible exchange rate the rewards included three decades of faster economic growth and an unprecedented rise in australians living standards this paper provides a history of economic thought on the pros and cons of protectionism for the small distant natural resource rich australian economy and a survey of the literature on the extent effects and political economy reasons behind the growth of australian protection and its eventual dismantling

design choices in privatized social security systems learning from the swedish experience in the 2000 u s presidential campaign george w bush advocated a partial privatization of the social security system according to his plan a portion of the payroll tax would be designated for individual savings accounts at the same time as this issue was being debated in the united states sweden was in the process of launching a system that is very similar to president bush s proposal although bush s plan did not get much attention in the early years of his administration the proposal may resurface either in the united states or in other countries if so important lessons can be learned from the swedish experience in particular the swedish plan adopted an interesting mix of design choices that can now be evaluated based on three years of post implementation experience although there is a large literature in economics on the design of social security systems most of that literature is concerned with macroeconomic considerations such as funding in contrast there has been much less attention devoted to the details of how plans might be designed in part because these details do not seem important from a standard economic perspective in this paper we reverse this usual pattern and focus our attention on the design aspects of the swedish plan we find that although most of the design choices are those that might be approved by most economists in some cases these choices produced undesirable consequences

wages and involuntary unemployment in the slack season of a village economy abstract we model slack season wages in a village economy in the presence of involuntary unemployment our model draws its inspiration from sociological notions of everyday peasant resistance in particular labourers can react to employers who pay low slack wages by refusing to work for them in the relatively tight peak season such refusals however are not automatic and are modelled endogenously a continuum of equilibrium wage configurations is obtained these configurations barring one involve wages exceeding reservation wages despite the presence of involuntary unemployment several qualitative observations follow these are examined with respect to available empirical data in particular the village survey of palanpur

what makes an investment risky an analysis of price path characteristics abstract we examine the influence of financial asset historical price path characteristics on investors risk perception return beliefs and investment propensity to that end we run a series of survey experiments in which we present various price patterns to individuals with vested interest in financial matters our findings reveal that price paths with identical daily and monthly returns and consequently identical return standard deviation can lead to substantially different risk perception by investors indicating that historical volatility is insufficient to explain risk perception salient features such as highs lows and crashes are the most influential drivers of perceived risk in price paths return forecasts are primarily driven by past overall returns and the most recent price developments perceived risk and return beliefs strongly predict investment propensity

product differentiation search costs and competition in the mutual fund industry a case study of s p 500 index funds we investigate the role that non portfolio fund differentiation and information search frictions play in creating two salient features of the mutual fund industry the large number of funds and the sizeable dispersion in fund fees in a case study we find that despite the financial homogeneity of s p 500 index funds this sector exhibits the fund proliferation and fee dispersion observed in the broader industry we show how extra portfolio mechanisms explain these features these mechanisms also suggest an explanation for the puzzling late 1990s shift in sector assets to more expensive and often newly entered funds an influx of highinformation cost novice investors

how price path characteristics shape investment behavior abstract price paths are often the only graphical representation of financial products investors receive before making an investment decision we argue that price paths serve as graphical frames that influence the perceived attractiveness of an asset by highlighting specific asset characteristics in a controlled lab experiment we find that price paths have an impact on investment decisions in a regression we test a simple model relating the perception of price path shapes to several heuristics these heuristics are focusing on more recent outcomes deriving implicit reference prices from focal prices focusing on losses and estimating risk from the amplitude of the path we conclude that investment decisions are systematically biased due to the shape of an asset s price path

on the decomposition of wage differentials the often used method for decomposing wage differentials into human capital and discrimination components is reformulated so that both t he disadvantage or cost discrimination it imposes on a black or minority wage earner and the advantage or benefit it bestows on a white or majority wage earner can be estimated copyright 1988 by mit press

optimal defaults and active decisions defaults often have a large influence on consumer decisions we identify an overlooked but practical alternative to defaults requiring individuals to make an explicit choice for themselves we study such active decisions in the context of 401 k saving we find that compelling new hires to make active decisions about 401 k enrollment raises the initial fraction that enroll by 28 percentage points relative to a standard opt in enrollment procedure producing a savings distribution three months after hire that would take 30 months to achieve under standard enrollment we also present a model of 401 k enrollment and derive conditions under which the optimal enrollment regime is automatic enrollment i e default enrollment standard enrollment i e default non enrollment or active decisions i e no default and compulsory choice active decisions are optimal when consumers have a strong propensity to procrastinate and savings preferences are highly heterogeneous financial illiteracy however favors default enrollment over active decision enrollment

how does household portfolio diversification vary with financial literacy and financial advice household investment mistakes are an important concern for researchers and policymakers alike portfolio underdiversification ranks among those mistakes that are potentially most costly however its roots and empirical importance are poorly understood i estimate quantitatively meaningful diversification statistics and investigate their relationship with key variables nearly all households that score high on financial literacy or rely on professionals or private contacts for advice achieve reasonable investment outcomes compared to these groups households with below median financial literacy that trust their own decision making capabilities lose an expected 50 bps on average all group differences stem from the top of the loss distribution