does education affect risk aversion evidence from the british education reform individual risk attitudes are frequently used to predict decisions regarding education however using risk attitudes as a control variable for decisions about education has been criticized because of the potential for reverse causality causality between risk aversion and education is unclear and disentangling the different directions it may run is difficult in this study we make the first attempt to investigate the causal effects of education on risk aversion by examining the british education reform of 1972 which increased the duration of compulsory schooling from age 15 to age 16 using regression discontinuity design we find that this additional year of schooling increases the level of risk aversion which is contrary to previous findings in the literature and we also find that this result is particularly strong for individuals with less education this positive causal effect of education on risk aversion might alleviate concerns regarding the endogeneity reverse causality issue when using risk aversion as an explanatory variable for decisions about education the sign would remain credible because the coefficients are underestimated

introducing incentives in the market for live and cadaveric organ donations we evaluate the introduction of monetary incentives in the market for live and cadaveric organ donations we show that monetary incentives would increase the supply of organs for transplant sufficiently to eliminate the very large queues in organ markets and the suffering and deaths of many of those waiting without increasing the total cost of transplant surgery by more than about 12 percent we build on the value of life literature and other parts of economic analysis to estimate the equilibrium cost of live transplants for kidneys and livers we also show that market price for kidneys will be determined by the cost of live donations even though most organs will come from cadavers

research design meets market design using centralized assignment for impact evaluation a growing number of school districts use centralized assignment mechanisms to allocate school seats in a manner that reflects student preferences and school priorities many of these assignment schemes use lotteries to ration seats when schools are oversubscribed the resulting random assignment opens the door to credible quasi experimental research designs for the evaluation of school effectiveness yet the question of how best to separate the lottery generated randomization integral to such designs from non random preferences and priorities remains open this paper develops easily implemented empirical strategies that fully exploit the random assignment embedded in a wide class of mechanisms while also revealing why seats are randomized at one school but not another we use these methods to evaluate charter schools in denver one of a growing number of districts that combine charter and traditional public schools in a unified assignment system the resulting estimates show large achievement gains from charter school attendance our approach generates efficiency gains over ad hoc methods such as those that focus on schools ranked first while also identifying a more representative average causal effect we also show how to use centralized assignment mechanisms to identify causal effects in models with multiple school sectors

individual risk attitudes measurement determinants and behavioral consequences this paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects homes using a question asking people about their willingness to take risks in general we find that gender age height and parental background have an economically significant impact on willingness to take risks the experiment confirms the behavioral validity of this measure using paid lottery choices turning to other questions about risk attitudes in specific contexts we find similar results on the determinants of risk attitudes and also shed light on the deeper question of stability of risk attitudes across contexts we conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks occupational choice and smoking the question about risk taking in general generates the best all round predictor of risky behavior

health shocks and risk aversion we empirically assess whether a health shock influences individual risk aversion we use grip strength data to obtain an objective health shock indicator in order to account for the non random nature of our data regression adjusted matching is employed risk preferences are traditionally assumed to be constant however we find that a health shock increases individual risk aversion the finding is robust to a series of sensitivity analyses and persists for at least four years after the shock income changes do not seem to be the driving mechanism

long term and spillover effects of health shocks on employment and income abstract we use matching combined with difference in differences to identify the causal effects of sudden illness represented by acute hospitalizations on employment and income up to six years after the health shock using linked dutch hospital and tax register data an acute hospital admission lowers the employment probability by seven percentage points and results in a 5 percent loss of personal income two years after the shock there is no subsequent recovery in either employment or income there are large spillover effects household income falls by 50 percent more than the income of the disabled person

policy analysis in matching markets abstract price and quantity interventions intended to affect assignments are common in many labor and education markets e g financial aid quotas this article discusses an empirical framework based on the theory of stable matching that is suitable for policy analysis while accounting for the presence of equilibrium sorting it then compares financial incentives and supply interventions for encouraging the training of family medicine residents in rural america due to equilibrium effects the primary effect of financial incentives is to increase the quality not numbers of residents in rural programs while quantity regulations directly affect numbers without adversely affecting quality

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

internet advertising and the generalized second price auction selling billions of dollars worth of keywords we investigate the generalized second price gsp auction a new mechanism used by search engines to sell online advertising although gsp looks similar to the vickrey clarke groves vcg mechanism its properties are very different unlike the vcg mechanism gsp generally does not have an equilibrium in dominant strategies and truth telling is not an equilibrium of gsp to analyze the properties of gsp we describe the generalized english auction that corresponds to gsp and show that it has a unique equilibrium this is an ex post equilibrium with the same payoffs to all players as the dominant strategy equilibrium of vcg

the economic consequences of health shocks evidence from vietnam this paper finds that the incomes of urban households are more vulnerable to health shocks than rural households that health shocks may precipitate increases in unearned income that partially offset reductions in earned income and large increases in medical spending even among insured households it also finds that households spend less on food following a health shock but more on budget items such as housing and electricity measures of household health shocks used include a recent death of a working age household member a long inpatient spell and a recent sizeable drop in the body mass index of the household head

institutions health shocks and labour market outcomes across europe this paper investigates the relationship between health shocks and labour market outcomes in 9 european countries using the european community household panel matching techniques are used to control for the non experimental nature of the data the results suggest that there is a significant causal effect from health on the probability of employment individuals who incur a health shock are significantly more likely to leave employment and transit into disability the estimates differ across countries with the largest employment effects being found in the netherlands denmark spain and ireland and the smallest in france and italy differences in social security arrangements help to explain these cross country differences

violence and risk preference experimental evidence from afghanistan we investigate the relationship between violence and economic risk preferences in afghanistan combining i a two part experimental procedure identifying risk preferences violations of expected utility and specific preferences for certainty ii controlled recollection of fear based on established methods from psychology and iii administrative violence data from precisely geocoded military records we document a specific preference for certainty in violation of expected utility the preference for certainty which we term a certainty premium is exacerbated by the combination of violent exposure and controlled fearful recollections the results have implications for risk taking and are potentially actionable for policymakers and marketers

marketplaces markets and market design marketplaces are often small parts of large markets and both markets and marketplaces come in many varieties market design seeks to understand what marketplaces must accomplish to enable different kinds of markets marketplaces can have varying degrees of success and there can be marketplace failures i ll discuss labor markets like the market for new economists and also markets for new lawyers and doctors that have suffered from the unraveling of appointment dates to well before employment begins markets work best if they enjoy social support but some markets are repugnant in the sense that some people think they should be banned even though others want to participate in them laws banning such markets often contribute to the design of illegal black markets and this raises new issues for market designers i ll briefly discuss markets and black markets for narcotics marijuana sex and surrogacy and the design of markets for kidney transplants in the face of widespread laws against and broader repugnance for compensating organ donors i conclude with open questions and engineering challenges

unraveling reduces mobility in a labor market gastroenterology with and without a centralized match the entry level market for american gastroenterologists was organized by a centralized clearinghouse from 1986 to 1996 before and since it has been conducted via a decentralized market in which appointment dates have unraveled to well over a year before the start of employment we find that both before and after the years in which the centralized clearinghouse was used gastroenterologists are less mobile and more likely to be employed at the same hospital in which they were internal medicine residents than when the clearinghouse was in use this suggests that the clearinghouse not only coordinates the timing of appointments but also increases the scope of the market compared to a decentralized market with early appointments

imperfect competition in two sided matching markets abstract this paper considers a simple equilibrium model of an imperfectly competitive two sided matching market firms and workers may have heterogeneous preferences over matches on the other side and the model allows for both uniform and personalized wages or contracts to make the model tractable i use the azevedo and leshno 2013 framework in which a finite number of firms is matched to a continuum of workers in equilibrium even if wages are exogenous and fixed firms have incentives to strategically reduce their capacity to increase the quality of their worker pool the intensity of incentives to reduce capacity is given by a simple formula analogous to the classic cournot model but depends on different moments of the distribution of preferences i compare markets with uniform and personalized wages for fixed quantities markets with personalized wages always yield higher efficiency than markets with uniform wages but may be less efficient if firms reduce capacity to avoid bidding too much for star workers

institutionalized uncertainty the rule of law and the sources of democratic stability the third wave of democratization has been accompanied by two innovative theoretical claims that procedural regime attributes have systematic consequences for substantive outcomes under democracy and authoritarianism many rule of law claims associate democracy with lower risks and greater predictability over outcomes than authoritarianism the institutionalized uncertainty claim expects nearly the opposite pattern each has important implications for regime support and thus for regime in stability this article argues that neither approach effectively captures global patterns of risk and predictability a reconsideration shows that both approaches mischaracterize both regime types predictability is shown to vary at least as much across as between the two regime types this is the result of factors exogenous to procedures such as structures of political social and economic conflict as a result these structural conditions rather than regime features alone explain outcomes such as democratic in

self fulfilling early contracting rush in markets for entry level professionals the insurance motive drives some participants to sign early contracts the rush to early contracting can be self fulfilling as both its effect on expectations about demand supply balance in the subsequent spot market and the effect on it from changes in the demand supply balance can be nonmonotone matching markets with more risk averse participants a greater uncertainty regarding relative supply of positions or a more polarized distribution of applicant qualities are more vulnerable to self fulfilling early contracting rushes employers can have a collective interest in preventing early offers to a few promising applicants from starting the rushes

what s to know about the credibility of empirical economics the scientific credibility of economics is itself a scientific question that can be addressed with both theoretical speculations and empirical data in this review we examine the major parameters that are expected to affect the credibility of empirical economics sample size magnitude of pursued effects number and pre selection of tested relationships flexibility and lack of standardization in designs definitions outcomes and analyses financial and other interests and prejudices and the multiplicity and fragmentation of efforts we summarize and discuss the empirical evidence on the lack of a robust reproducibility culture in economics and business research the prevalence of potential publication and other selective reporting biases and other failures and biases in the market of scientific information overall the credibility of the economics literature is likely to be modest or even low

shocks individual risk attitude and vulnerability to poverty among rural households in thailand and vietnam summary we examine whether the experience of shocks influences individual risk attitude we measure the risk attitude of more than 4 000 households in thailand and vietnam via a simple survey item the experience of adverse shocks which is typical for poor and vulnerable households is related to a higher degree of risk aversion even when controlled for a large set of socio demographic variables therefore shocks perpetuate vulnerability to poverty via their effect on risk attitude we extend this general finding to various categories of shocks and find differences between thailand and vietnam this suggests that risk coping strategies profit from case specific design

the intergenerational transmission of risk and trust attitudes recent theories endogenize the attitude endowments of individuals assuming that they are shaped by the attitudes of parents and other role models this paper tests empirically for the relevance of three aspects of the attitude transmission process highlighted in this theoretical literature 1 transmission of attitudes from parents to children 2 an impact of prevailing attitudes in the local environment on child attitudes and 3 positive assortative mating of parents which enhances the ability of a parent to pass on his or her attitudes to the child we focus on two fundamentally important attitudes willingness to take risks and willingness to trust others we find empirical support for all three aspects providing an empirical underpinning for the literature an investigation of underlying mechanisms shows that socialization is important in the transmission process various parental characteristics and aspects of family structure are found to strengthen the socialization process with implications for modeling the socialization production function and for policies focused on affecting children s non cognitive skills the paper also provides evidence that the transmission of risk and trust attitudes affects a wide variety of child outcomes implying a potentially large total effect on children s economic situation

chinese college admissions and school choice reforms a theoretical analysis each year approximately 10 million high school seniors in china compete for 6 million seats through a centralized college admissions system within the last decade many provinces have transitioned from a sequential to a parallel mechanism to make their admissions decisions in this study we characterize a parametric family of application rejection assignment mechanisms including the sequential deferred acceptance and parallel mechanisms in a nested framework we show that all of the provinces that have abandoned the sequential mechanism have moved toward less manipulable and more stable mechanisms we also show that existing empirical evidence is consistent with our theoretical predictions

a competitive theory of equilibrium and disequilibrium unravelling in two sided matching i offer a competitive explanation for the rush toward early contracting in matching markets the explanation does not rely on market power strategic motives or instability of the assignment mechanism uncertainty about workers ability will produce inefficient matching if contracts are formed early however the insurance gain from early contracting may outweigh the loss from inefficient matching if firms are risk neutral it is the mediocre firms that will have the greatest incentive to offer early contracts opening up a market for early contracting will generally benefit the firms and hurt the workers if firms are sufficiently risk averse even the lowest quality firms may want to offer early contracts and a competitive equilibrium may not exist

leveling the playing field sincere and sophisticated players in the boston mechanism empirical and experimental evidence suggests different levels of sophistication among families in the boston public school student assignment plan we analyze the preference revelation game induced by the boston mechanism with sincere players who report their true preferences and sophisticated players who play a best response we characterize the set of nash equilibrium outcomes as the set of stable matchings of a modified economy where sincere students lose priority to sophisticated students any sophisticated student weakly prefers her assignment under the pareto dominant nash equilibrium of the boston mechanism to her assignment under the recently adopted student optimal stable mechanism jel d82 i21

the ethics of incentivizing the uninformed a vignette study abstract our recent working paper ambuehl ockenfels and stewart 2017 shows theoretically and experimentally that people with higher costs of information processing respond more to an increase in the incentive for a complex transaction and decide to participate based on a worse understanding of its consequences here we address the resulting tradeoff between the principle of informed consent and the principle of free contract respondents to our vignette study on oocyte donation overwhelmingly favor the former and support policies that require donors to thoroughly understand the transaction this finding helps design markets that are not only efficient but also considered ethical

the communication requirements of social choice rules and supporting budget sets the paper examines the communication requirements of social choice rules when the sincere agents privately know their preferences it shows that for a large class of choice rules any minimally informative way to verify that a given alternative is in the choice rule is by verifying a budget equilibrium i e that the alternative is optimal to each agent within a budget set given to him therefore any communication mechanism realizing the choice rule must find a supporting budget equilibrium we characterize the class of choice rules that have this property furthermore for any rule from the class we characterize the minimally informative messages budget equilibria verifying it this characterization is used to identify the amount of communication needed to realize a choice rule measured with the number of transmitted bits or real variables applications include efficiency in convex economies exact or approximate surplus maximization in combinatorial auctions the core in indivisible good economies and stable many to one matchings

the combinatorial assignment problem approximate competitive equilibrium from equal incomes this paper proposes a new mechanism for combinatorial assignment for example assigning schedules of courses to students based on an approximation to competitive equilibrium from equal incomes ceei in which incomes are unequal but arbitrarily close together the main technical result is an existence theorem for approximate ceei the mechanism is approximately efficient satisfies two new criteria of outcome fairness and is strategyproof in large markets its performance is explored on real data and it is compared to alternatives from theory and practice all other known mechanisms are either unfair ex post or manipulable even in large markets and most are both manipulable and unfair

an empirical analysis of risk aversion and income growth risk aversion enters many theoretical models of human capital investment but attitudes toward risk have not been incorporated in empirical models of human capital investment this article develops a model of the joint investment in financial wealth and human wealth to show that human capital investment is an inverse function of the degree of relative risk aversion using data from the survey of consumer finances i find that wage growth is positively correlated with preferences for risk taking more educated individuals are also more likely to be risk takers thus risk taking explains a portion of the returns to education

why do tougher caseworkers increase employment the role of programme assignment as a causal mechanism abstract previous research found that less accommodating caseworkers are more successful in placing unemployed workers into employment this paper explores the causal mechanisms behind this result using semi parametric mediation analysis analyzing rich linked job seeker caseworker data for switzerland we find that the positive employment effects of less accommodating caseworkers are not driven by a particularly effective mix of labor market programs but rather by other dimensions of the counseling process possibly including threats of sanctions and pressure to accept jobs

mistaken play in the deferred acceptance algorithm implications for positive assortative matching abstract recent literature has documented failures of truthful preference reporting in the strategy proof deferred acceptance algorithm i consider the implications of these strategic mistakes for a common welfare consideration the ability of the mechanism to sort the best students to the best schools i find that these mistakes have the potential to significantly help or significantly hinder sorting through this channel the presence of mistaken play may have widely varying welfare effects i discuss related considerations in the welfare evaluation of mistaken play in the deferred acceptance algorithm and the implications for nudges that correct these mistakes

direct evidence of risk aversion as a source of advantageous selection in health insurance abstract using the self stated degree of risk aversion regarding health from the gsoep we find some evidence for risk aversion being a source of advantageous selection risk averse men more often procure supplementary insurance for hospital visits despite needing the additional coverage less