Knowledge that Transforms

Public recognition is frequently used to motivate desirable behavior, yet its welfare effects—such as costs of shame or gains from pride— are rarely measured. We develop a portable empirical methodology for measuring and monetizing social image utility, and we deploy it in experiments on exercise and charitable behavior. In all experiments, public recognition motivates desirable behavior but creates highly unequal image payoffs. High-performing individuals enjoy significant utility gains, while low-performing individuals incur significant utility losses. We estimate structural models of social signaling, and we use the models to explore the social efficiency of public recognition policies.

How does rural-urban migration shape urban production in developing countries? We use longitudinal data on Chinese manufacturing firms between 2000 and 2006, and exploit exogenous variation in rural-urban migration induced by agricultural income shocks for identification. We find that, when immigration increases, manufacturing production becomes more labor intensive and productivity declines. We investigate the reorganization of production using patent applications and product information. We show that rural-urban migration induces both labor-oriented technological change and the adoption of labor intensive product varieties.

Brodeur, Cook, and Heyes (2020) study hypothesis tests from economic articles and find evidence for p-hacking and publication bias, in particular for instrumental variable and difference-in-difference studies. When adjusting for rounding errors (introducing a novel method), statistical evidence for p-hacking from randomization tests and caliper tests at the 5 percent significance threshold vanishes for difference-in-differnce studies but remains for instrumental variable studies. Results at the 1 percent and 10 percent significance thresholds remain largely similar. In addition, Brodeur, Cook, and Heyes derive latent distributions of z-statistics absent publication bias using two different approaches. We establish for each approach a result that challenges its applicability.

Expanding credit access in developing contexts could help some households while harming others. Microcredit studies show different effects at different quantiles of household profit, including some negative effects; yet these findings also differ across studies. I develop new Bayesian hierarchical models to aggregate the evidence on these distributional effects for mixture-type outcomes such as household profit. Applying them to microcredit, I find a precise zero effect from the fifth to seventy-fifth quantiles, and uncertain yet large effects on the upper tails, particularly for households with business experience. These quantile estimates are more reliable than averages because the data are fat tailed.

Using a laboratory experiment, we identify whether decision-makers consider it a mistake to violate canonical choice axioms. To do this, we incentivize subjects to report axioms they want their decisions to satisfy. Then, subjects make lottery choices which might conflict with their axiom preferences. In instances of conflict, we give subjects the opportunity to re-evaluate their decisions. We find that many individuals want to follow canonical axioms and revise their choices to be consistent with the axioms. In a shorter online experiment, we show correlations of mistakes with response times and measures of cognition.

Employment may be important to well-being for reasons beyond its role as an income source. This paper presents a causal estimate of the psychosocial value of employment in refugee camps in Bangladesh. We involve 745 individuals in a field experiment with three arms: a control arm, a weekly cash arm, and an employment arm of equal value. Employment raises psychosocial well-being substantially more than cash alone, and 66 percent of the employed are willing to forgo cash payments to continue working temporarily for free. Despite material poverty, those in our context both experience and recognize a nonmonetary, psychosocial value to employment.

This paper shows that racial composition shocks during the Great Migration (1940–1970) reduced the gains from growing up in the northern United States for Black families and can explain 27 percent of the region’s racial upward mobility gap today. I identify northern Black share increases by interacting pre-1940 Black migrants’ location choices with predicted southern county out-migration. Locational changes, not negative selection of families, explain lower upward mobility, with persistent segregation and increased crime and policing as plausible mechanisms. The case of the Great Migration provides a more nuanced view of moving to opportunity when destination reactions are taken into account.

This paper aims to improve the practical applicability of the classic theory of incentive contracts under moral hazard. We establish conditions under which the information provided by an A/B test of incentive contracts is sufficient for answering the question of how best to improve a status quo incentive contract, given a priori knowledge of the agent’s monetary preferences. We assess the empirical relevance of this result using data from DellaVigna and Pope’s (2018) study of a variety of incentive contracts. Finally, we discuss how our framework can be extended to incorporate additional considerations beyond those in the classic theory.

We exploit a policy designed to randomly allocate roommates in a large South African university to investigate whether interracial interaction affects stereotypes, attitudes and performance. Using implicit association tests, we find that living with a roommate of a different race reduces White students' negative stereotypes towards Black students and increases interracial friendships. Interaction also affects academic outcomes: Black students improve their GPA, pass more exams and have lower dropout rates. This effect is not driven by roommate's ability.

Central banks (the Fed) and markets (the market) often disagree about the path of interest rates. We develop a model where these different views stem from disagreements between the Fed and the market about future aggregate demand. We then study the implications of these disagreements for monetary policy, the term structure of interest rates, and economic activity. In our model, agents learn from the data but not from each other—they are opinionated. In this context, the market perceives monetary policy “mistakes” and the Fed partially accommodates the market’s view to mitigate the impact of perceived “mistakes” on output and inflation. The Fed plans to implement its own view gradually, as it expects the market to receive more information and move closer to the Fed’s belief. Disagreements about future demand translate into disagreements about future interest rates. Disagreements also provide a microfoundation for monetary policy shocks: after a surprise policy announcement, the market (partially) learns the Fed’s belief and the extent of future “mistaken” interest rate changes. We categorize these shocks into three groups: Fed belief shocks, market reaction shocks, and tantrum shocks. Tantrum shocks are the most damaging, as they arise when the Fed fails to forecast the forward rates’ reaction. These shocks motivate gradualism and communication policies that reveal the Fed’s belief, not to persuade the market (which is opinionated) but to prevent the market from misinterpreting the Fed’s belief. Finally, we also find that disagreements affect inflation and create a policy trade-off between output and inflation stabilization akin to “cost-push” shocks.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.