Research for Policy Makers

Economics can provide interesting insights into problems that policy makers often try to tackle, like workplace incentives, voting, and discrimination. This line of research explores such topics.

Using Behavioral Economics to Curb Workplace Misbehaviors: Evidence from a Natural Field Experiment

Flory, Jeffrey A., Leibbrandt Andreas and John A. List

Working Paper

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Workplace misbehaviors are often governed by explicit monitoring and strict punishment. Such enforcement activities can serve to lessen worker productivity and harm worker morale. We take a different approach to curbing worker misbehavior—bonuses. Examining more than 6500 donor phone calls across more than 80 workers, we use a natural field experiment to investigate how different wage contracts influence workers’ propensity to break workplace rules in harmful ways. Our findings show that even though standard relative performance pay contracts, relative to a fixed wage scheme, increase productivity, they have a dark side: they cause considerable cheating and sabotage of co-workers. Yet, even in such environments, by including an unexpected bonus, the employer can substantially curb worker misbehavior. In this manner, our findings reveal how employers can effectively leverage bonuses to eliminate undesired behaviors induced by performance pay contracts.

Voting to Tell Others

DellaVigna, Stefano, John A. List, Ulrike Malmendier, Gautam Rao

Review of Economic Studies: Forthcoming (2016)

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Why do people vote? We design a field experiment to estimate a model of voting ‘because others will ask’. The expectation of being asked motivates turnout if individuals derive pride from telling others that they voted, or feel shame from admitting that they did not vote, provided that lying is costly. In a door-to-door survey about election turnout, we experimentally vary (i) the informational content and use of a flyer pre-announcing the survey, (ii) the duration and payment for the survey, and (iii) the incentive to lie about past voting. The experimental results indicate significant social image concerns. For the 2010 Congressional election, we estimate a value of voting ‘to tell others’ of about $15, contributing 2 percentage points to turnout. Lastly, we evaluate a get-out-the-vote intervention in which we tell potential voters that we will ask if they voted.

A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly

Gosner, Greer K, John A. List, Robert D, Metcalfe

NBER Working Paper 22316

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Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. This study makes use of a unique opportunity to “look under the hood” of an organization that critically relies on worker effort and performance. By partnering with Virgin Atlantic Airways on a field experiment that includes over 40,000 unique flights covering an eight-month period, we explore how information and incentives affect captains’ performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments-which include performance information, personal targets, and prosocial incentives-induces captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments saved between 266,000-704,000 kg of fuel for the airline over the eight-month experimental period. These savings led to between 838,000-2.22 million kg of CO2 abated at a marginal abatement cost of negative $250 per ton of CO2 (i.e. a $250 savings per ton abated) over the eight-month experimental period. Methodologically, our approach highlights the potential usefulness of moving beyond an experimental design that focuses on short-run substitution effects, and it also suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole.

Nurture affects gender differences in spatial abilities

Moshe Hoffman, Uri Gneezy, and John A. List

Proceedings of the National Academy of Sciences — Volume 108, Number 36 (2011) 14786–14788

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Women remain significantly underrepresented in the science, engineering, and technology workforce. Some have argued that spatial ability differences, which represent the most persistent gender differences in the cognitive literature, are partly responsible for this gap. The underlying forces at work shaping the observed spatial ability differences revolve naturally around the relative roles of nature and nurture. Although these forces remain among the most hotly debated in all of the sciences, the evidence for nurture is tenuous, because it is difficult to compare gender differences among biologically similar groups with distinct nurture. In this study, we use a large-scale incentivized experiment with nearly 1,300 participants to show that the gender gap in spatial abilities, measured by time to solve a puzzle, disappears when we move from a patrilineal society to an adjoining matrilineal society. We also show that about one-third of the effect can be explained by differences in education. Given that none of our participants have experience with puzzle solving and that villagers from both societies have the same means of subsistence and shared genetic background, we argue that these results show the role of nurture in the gender gap in cognitive abilities.

Using Artefactual Field Experiments to Learn about the Incentives for Sustainable Forest Use in Developing Economies

Maarten Voors, Erwin Bulte, Andreas Kontoleon, John A. List, and Ty Turley

American Economic Review: Papers & Proceedings 2011, 101:3, 329–333

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We implement a public goods game and a social intervention modeled after a public goods game in rural Sierra Leone near the Gola Forest Reserve. We also collect demographic, economic and forest conservation data on households in the area. We use this data to assess the mapping of social preferences from the artefactual field experiment (AFE) into real world behavior. We find evidence of heterogeneity in shifting factors between the AFE, the field experiment, and conservation outcomes. We also find evidence that social controls like war violence and witchcraft may explain some of this correlation.

Predicting and Preventing Shootings among At-Risk Youth

Dana Chandler, Steven D. Levitt, and John A. List

American Economic Review: Papers & Proceedings 2011, 101:3, 288–292

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Each year, more than 250 students in the Chicago Public Schools (CPS) are shot. The authors of this paper worked with the leadership of CPS to build a predictive model of shootings that helped determine which students would be included in a highly targeted and resource intensive mentorship program. This paper describes our predictive model and offers a preliminary evaluation of the mentoring intervention performed by Youth Advocate Programs, Inc. (YAP). We find little evidence that the intervention reduces school misconducts or improves educational outcomes. The scale of intervention was too small to generate meaningful findings on shootings.

That’s News to Me! Information Revelation in Professional Certification Markets

Jin, Ginger, Andrew Kato, and John A. List

Economic Inquiry, (2010), forthcoming.

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Using sportscard grading as an example, we employ field experiments to investigate empirically the informational role of professional certifiers. In the past 20 years, professional grading of sportscards has evolved in a way that provides a unique opportunity to measure the information provision of a monopolist certifier and that of subsequent entrants. Empirical results suggest three patterns: the grading certification provided by the first professional certifier offers new information to inexperienced traders but adds little information to experienced dealers. This implies that the certification may reduce the information asymmetry between informed and uninformed parties. Second, compared with the incumbent, new entrants adopt more precise signals and use finer grading cutoffs to differentiate from the incumbent. Third, our measured differentiated grading cutoffs map consistently into prevailing market prices, suggesting that the market recognizes differences across multiple grading criteria.

Gender Differences in Competition: Evidence from a Matrilineal and a Patriarchal Society

Gneezy, Uri, Kenneth Leonard, and John A. List

Econometrica, (2009), 77(5), pp. 1637- 1664.

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We use a controlled experiment to explore whether there are gender differences in selecting into competitive environments across two distinct societies: the Maasai in Tanzania and the Khasi in India. One unique aspect of these societies is that the Maasai represent a textbook example of a patriarchal society, whereas the Khasi are matrilineal. Similar to the extant evidence drawn from experiments executed in Western cultures, Maasai men opt to compete at roughly twice the rate as Maasai women. Interestingly, this result is reversed among the Khasi, where women choose the competitive environment more often than Khasi men, and even choose to compete weakly more often than Maasai men. These results provide insights into the underpinnings of the factors hypothesized to be determinants of the observed gender differences in selecting into competitive environments.

Do Women Supply More Public Goods than Men? Preliminary Experimental Evidence from Matrilineal and Patriarchal Societies

Andersen, Steffen, Erwin Bulte, Uri Gneezy, and John A. List

American Economic Review, (2008), 98(2-P&P), pp. 376-381.

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The selfishness hypothesis has been studied extensively in experiments. One popular approach is to use variants of the simple prisoner’s dilemma game. For example, public goods experiments, which are n­person simultaneous move games, are designed to make individual contributions to the public good yield positive externalities, but noncontribution is a dominant strategy. A typical result in this setting is that subjects are sensitive to free­riding incentives, but nonetheless cooperate at a level that cannot be fully explained by the selfishness assumption.

Friend or Foe? A Natural Experiment of the Prisoner’s Dilemma

List, John A.

Review of Economics and Statistics, (2006), 88(3), pp. 463-471.

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This study examines data drawn from the game show Friend or Foe? which is similar to the classic prisoner’s dilemma tale: partnerships are endogenously determined, and players work together to earn money, after which they play a one-shot prisoner’s dilemma game over large stakes: varying from $200 to (potentially) more than $22,000. The data reveal several interesting insights; perhaps most provocatively, they suggest that even though the game is played in front of an audience of millions of viewers, some of the evidence is consistent with a model of discrimination. The observed patterns of social discrimination are unanticipated, however.

The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions

List, John A.

Journal of Political Economy, (2006), 114(1), pp. 1-37.

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This study develops theory and uses a door-to-door fund-raising field experiment to explore the economics of charity. We approached nearly 5000 households, randomly divided into four experimental treatments, to shed light on key issues on the demand side of charitable fund-raising. Empirical results are in line with our theory: in gross terms, the lotteries raised more money than the voluntary contributions treatments. Interestingly, in terms of both maximizing current contributions and inducing participation, we find that a one-standard deviation increase in female solicitor physical attractiveness is similar to that of the lottery incentive.

Shadow prices, environmental stringency, and international competitiveness

van Soest, Daan P., John A. List, and Tim Jeppesen

European Economic Review, (2006), 50(5), pp. 1151-1167.

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Empirical tests of the relationship between international competitiveness and the severity of environmental regulations are hampered by the lack of pollution abatement cost data for non- U.S. countries. The theory of the firm suggests that environmental stringency can be measured by the difference between a polluting input’s shadow price and its market price. We make a first attempt at quantifying such a measure for two industries located in nine European OECD countries. Overall, we provide (i) a new approach to measure cross-country regulatory differences in that we use a theoretically attractive measure of industry-specific private compliance cost, and (ii) empirical estimates that are an attractive tool for researchers and policymakers who are interested in examining how economic activity is influenced by compliance costs.

Conspiracies and Secret Price Discounts in the Marketplace: Evidence from Field Experiments

List, John A. and Michael K. Price

Rand Journal of Economics, (2005), 36(3), pp. 700-717.

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We explore collusion by using the tools of experimental economics in a naturally occurring market place. We report that competitive price theory adequately organizes data in multilateral decentralized bargaining markets without conspiratorial opportunities. When conspiratorial opportunities are allowed and contract prices are perfectly observed, prices (quantities) are considerably above (below) competitive levels. When sellers receive imperfect price signals, outcomes are intermediate to those of competitive markets and collusive markets with full information. Finally, experienced buyers serve as a catalyst to thwart attempts by sellers to engage in anti competitive pricing: in periods where experienced agents transact in the market, average transaction prices are below those realized in periods where only inexperienced agents execute trades.

When Economists Dream, They Dream of Clear Skies

Gayer, Ted, John Horowitz, and John A. List

The Economists’ Voice, (2005) 2(2), Article 7.

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Clear Skies is an economist’s approach to pollution reduction. We heartily endorse its core approach, while recommending surgery for a few minor blemishes.

Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace

List, John A.

Econometrica, (2004), 72(2), pp. 615-625.

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Several experimental studies have provided evidence that suggest indifference curve shave a kink around the current endowment level. These results, which clearly contradict closely held economic doctrines, have led some influential commentators to call for an entirely new economic paradigm to displace conventional neoclassical theory-e.g., prospect theory, which invokes psychological effects. This paper pits neo- classical theory against prospect theory by investigating data drawn from more than 375 subjects actively participating in a well-functioning marketplace. The pattern of results suggests that prospect theory adequately organizes behavior among inexperienced consumers, but consumers with intense market experience behave largely in accordance with neoclassical predictions. Moreover, the data are consistent with the notion that consumers learn to overcome the endowment effect in situations beyond specific problems they have previously encountered. This ‘transference of behavior’ across domains has important implications in both a positive and normative sense.

The Nature and Extent of Discrimination in the Marketplace: Evidence from the Field

List, John A

Quarterly Journal of Economics, 2004, 119(1): 49-89

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Empirical studies have provided evidence that discrimination exists in various markets, but they rarely allow the analyst to draw conclusions concerning the nature of discrimination. By combining data from bilateral negotiations in the sportscard market with complementary field experiments, this study provides a framework that amends this shortcoming. The experimental design, which includes data gathered from more than 1100 market participants, provides sharp findings: (i) there is a strong tendency for minorities to receive initial and final offers that are inferior to those received by majorities, and (ii) overall, the data indicate that the observed discrimination is not due to animus, but represents statistical discrimination.

Does Market Experience Eliminate Market Anomalies?

List, John A.

Quarterly Journal of Economics, (2003), 118(1), pp. 41-71.

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This study examines individual behavior places to investigate whether market experience Field evidence from both markets suggests that the neoclassical prediction as market experience in two well-functioning market increases. test of whether these observations are due to treatment (market experience) or selection (e.g., static preferences), I find that market experience plays a significant role in eliminating the endowment effect. I also find that these results are robust to institutional change and extend beyond the two marketplaces studied. Overall, this study provides strong evidence that market experience eliminates an important market anomaly.

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