Knowledge that Transforms

We find using laboratory experiments that primes that make religion salient cause subjects to identify more with their religion and affect their economic choices. The effect on choices varies by religion. For example, priming causes Protestants to increase contributions to public goods, whereas Catholics decrease contributions to public goods, expect others to contribute less to public goods, and become less risk averse. A simple model implies that priming effects reveal the sign of the marginal impact of religious norms on preferences. We find no evidence of religious priming effects on disutility of work effort, discount rates, or dictator game generosity.

We study the role of labor inputs in religious attendance using data on Oklahoma Methodist congregations from 1961 to 2003. Pastors play a significant role in church growth: replacing a 25th percentile pastor with a 75th percentile one increases annual attendance growth by 3%. A pastor’s performance in his or her first church (largely the result of random assignment) predicts future performance, suggesting a causal effect of pastors on growth. The deployment of pastors by the church indicates efficient use of labor: low-performing pastors are more likely to be rotated or exit the sample, and high-performing pastors are moved to larger congregations.

We discuss the tension between “what we can get” (identification) and “what we want” (parameters of interest) in models of policy choice (treatment assignment). Our nonstandard empirical object of interest is the ranking of counterfactual policies. Partial identification of treatment effects maps into a partial welfare ranking of treatment assignment policies. We characterize the identified ranking and show how the identifiability of the ranking depends on identifying assumptions, the feasible policy set, and distributional preferences. An application to the project STAR experiment illustrates this dependence. This paper connects the literatures on partial identification, robust statistics, and choice under Knightian uncertainty.

This paper proposes consistent testing methods for examining the effect of a policy treatment on the whole distribution of a response outcome within the setting of a regression discontinuity design. These methods are particularly useful when a policy is expected to produce treatment effects that are heterogeneous along some unobserved characteristics. The test statistics are Kolmogorov-Smirnov-type and are asymptotically distribution free when the data are i.i.d. The proposed tests are applied to three seminal RD studies (Pop-Eleches & Urquiola, 2013; Abdulkadiroglu, Angrist, & Pathak, 2014; and Battistin et al., 2009).

In the 1980s and 1990s, the U.S. labor market experienced a remarkable polarization along with fast technological catch-up as Europe and Japan improved their global innovation performance. Is foreign technological convergence an important source of wage polarization? To answer this question, we build a multicountry Schumpeterian growth model with heterogeneous workers, endogenous skill formation, and occupational choice. We show that convergence produces polarization through business stealing and increasing competition in global innovation races. Quantitative analysis shows that these channels can be important sources of U.S. polarization. Moreover, the model delivers predictions on the U.S. wealth-income ratio consistent with empirical evidence.

Corruption estimates rely largely on self-reports of affected individuals and officials. Yet survey respondents are often reticent to tell the truth about sensitive subjects, leading to downward biases in surveybased corruption estimates. This paper develops a method to estimate the prevalence of reticent behavior and reticence-adjusted rates of corruption using survey responses to sensitive questions. A statistical model captures how respondents answer a combination of conventional and randomresponse questions, allowing identification of the effect of reticence. GMM and maximum likelihood estimates are obtained for ten countries. Adjusting for reticence dramatically alters the perceptions of the extent of corruption.

This paper examines how risk behavior in the limelight differs from that in anonymity. In two separate experiments, we find that subjects are more risk averse in the limelight. However, risky choices are similarly path dependent in the different treatments. Under both limelight and anonymous laboratory conditions, a simple prospect theory model with a path-dependent reference point provides a better explanation for subjects’ behavior than a flexible specification of expected utility theory. In addition, our findings suggest that ambiguity aversion depends on being in the limelight, that passive experience has little effect on risk taking, and that reference points are determined by imperfectly updated expectations.

Using a unique, randomized information experiment embedded in a survey, this paper investigates how consumers’ inflation expectations respond to new information. We find that respondents, on average, update their expectations in response to (certain types of) information, and do so sensibly, in a manner consistent with Bayesian updating. As a result of information provision, the distribution of inflation expectations converges toward its center and cross-sectional disagreement declines. We document heterogeneous information processing by gender and present suggestive evidence of respondents forecasting under asymmetric loss. Our results provide support for expectation-formation models in which agents form expectations rationally but face information constraints.

We quantify the effects of lending and balance sheet channels on corporate investment during large devaluations. We find that if currency crises are accompanied by banking crises, domestic exporters holding unhedged foreign currency debt decrease investment while foreign exporters with better access to credit increase investment despite their unhedged foreign currency debt. We do not find such a differential effect under pure currency crises. Using firm-bank matched data during the global financial crisis, we showthat both domestic and foreign-owned firms experienced a decline in bank credit from affected banks; however, foreign-owned firms substituted the lost credit.

In this paper, we relax the assumption of constant regime-specific mean growth rates in Hamilton's (1989) two-state Markov-switching model of the business cycle. We introduce a random walk hierarchy prior for each regime-specific mean growth rate and impose a cointegrating relationship between the mean growth rates in recessionary and expansionary periods. By applying the proposed model to postwar U.S. real GDP growth (1947:Q4–2011:Q3), we uncover the evolving nature of the regime-specific mean growth rates of real output in the U.S. business cycle. Additional features of the postwar U.S. business cycle that we uncover include a steady decline in the long-run mean growth rate of real output over the postwar sample and an asymmetric error-correction mechanism when the economy deviates from its long-run equilibrium.