Knowledge that Transforms

Gender differences in task allocations may sustain vertical gender segregation in labor markets. We examine the allocation of a task that everyone prefers be completed by someone else (writing a report, serving on a committee, etc.) and find evidence that women, more than men, volunteer, are asked to volunteer, and accept requests to volunteer for such tasks. Beliefs that women, more than men, say yes to tasks with low promotability appear as an important driver of these differences. If women hold tasks that are less promotable than those held by men, then women will progress more slowly in organizations.

In a field experiment with a retail chain (1,300 employees, 193 shops), randomly selected sales teams received a bonus. The bonus increases both sales and number of customers dealt with by 3 percent. Each dollar spent on the bonus generates $3.80 in sales, and $2.10 in profit. Wages increase by 2.2 percent while inequality rises only moderately. The analysis suggests effort complementarities to be important, and the effectiveness of peer pressure in overcoming free-riding to be limited. After rolling out the bonus scheme, the performance of the treatment and control shops converges, suggesting long-term stability of the treatment effect.

Urban growth requires the replacement of outdated buildings, yet growth may be restricted when landowners do not internalize positive spillover effects from their own reconstruction. The Boston Fire of 1872 created an opportunity for widespread simultaneous reconstruction, initiating a virtuous circle in which building upgrades encouraged further upgrades of nearby buildings. Land values increased substantially among burned plots and nearby unburned plots, capitalizing economic gains comparable to the prior value of burned buildings. Boston had grown rapidly prior to the Fire, but negative spillovers from outdated durable buildings had substantially constrained its growth by dampening reconstruction incentives.

A strategy is obviously dominant if, for any deviation, at any information set where both strategies first diverge, the best outcome under the deviation is no better than the worst outcome under the dominant strategy. A mechanism is obviously strategy-proof (OSP) if it has an equilibrium in obviously dominant strategies. This has a behavioral interpretation: a strategy is obviously dominant if and only if a cognitively limited agent can recognize it as weakly dominant. It also has a classical interpretation: a choice rule is OSP-implementable if and only if it can be carried out by a social planner under a particular regime of partial commitment.

We develop a version of Afriat's theorem that is applicable in a variety of choice environments beyond the setting of classical consumer theory. This allows us to devise tests for rationalizability in environments where the set of alternatives is not the positive orthant of a Euclidean space and where the rationalizing utility function is required to satisfy properties appropriate to that environment. We show that our results are applicable, amongst others, to choice data on lotteries, contingent consumption, and intertemporal consumption.

We investigate the empirical relationship between ethnicity and culture, defined as a vector of traits reflecting norms, attitudes and preferences. Using surveys of individual values in 76 countries, we find that ethnic identity is a significant predictor of cultural values, yet that within-group variation in culture trumps between-group variation. Thus, in contrast to a commonly held view, ethnic and cultural diversity are unrelated. We explore the correlates of cultural diversity and of the overlap between culture and ethnicity, finding that the level of economic development is positively associated with cultural diversity and negatively associated with the overlap between culture and ethnicity. Finally, although only a small portion of a country's overall cultural heterogeneity occurs between groups, this does not imply that cultural differences between groups are irrelevant. Indeed, we find that civil conflict becomes more likely when there is greater overlap between ethnicity and culture.

Online prices are increasingly used for measurement and research applications, yet little is known about their relation to prices collected offline, where most retail transactions take place. I conduct the first large-scale comparison of prices simultaneously collected from the websites and physical stores of 56 large multi-channel retailers in 10 countries. I find that price levels are identical about 72 percent of the time. Price changes are not synchronized but have similar frequencies and average sizes. These results have implications for national statistical offices, researchers using online data, and anyone interested in the effect of the Internet on retail prices.

We develop a structural empirical model of the US banking sector. Insured depositors and run-prone uninsured depositors choose between differentiated banks. Banks compete for deposits and endogenously default. The estimated demand for uninsured deposits declines with banks' financial distress, which is not the case for insured deposits. We calibrate the supply side of the model. The calibrated model possesses multiple equilibria with bank-run features, suggesting that banks can be very fragile. We use our model to analyze proposed bank regulations. For example, our results suggest that a capital requirement below 18 percent can lead to significant instability in the banking system.

Chetty, Friedman, and Rockoff (2014a, b) study value-added (VA) measures of teacher effectiveness. CFR (2014a) exploits teacher switching as a quasi-experiment, concluding that student sorting creates negligible bias in VA scores. CFR (2014b) finds VA scores are useful proxies for teachers' effects on students' long-run outcomes. I successfully reproduce each in North Carolina data. But I find that the quasi-experiment is invalid, as teacher switching is correlated with changes in student preparedness. Adjusting for this, I find moderate bias in VA scores, perhaps 10–35 percent as large, in variance terms, as teachers' causal effects. Long-run results are sensitive to controls and cannot support strong conclusions.

We estimate a model of illicit drugs markets using data on purchases of crack cocaine. Buyers are searching for high-quality drugs, but they determine drugs' quality (i.e., their purity) only after consuming them. Hence, sellers can rip off first-time buyers or can offer higher-quality drugs to induce buyers to purchase from them again. In equilibrium, a distribution of qualities persists. The estimated model implies that if drugs were legalized, in which case purity could be regulated and hence observable, the average purity of drugs would increase by approximately 20 percent and the dispersion would decrease by approximately 80 percent. Moreover, increasing penalties may raise the purity and affordability of the drugs traded by increasing sellers’ relative profitability of targeting loyal buyers versus first-time buyers.