Knowledge that Transforms

We show that administrative hourly wage data exhibit considerable bunching at round numbers. We run two experiments randomizing wages around $0.10 and $1.00 to experimentally measure left-digit bias for identical tasks on Amazon Mechanical Turk; we fail to find any evidence of discontinuity in the labor supply function at round numbers despite estimating a considerable degree of monopsony. We replicate these results in administrative worker-firm hourly wage data from Oregon. We can rule out inattention estimates found in the behavioral product market literature. We provide evidence that firms “misoptimize” wage setting. More monopsony requires less employer misoptimization to explain bunching. (JEL D22, J22, J31, J42)

International migrants may facilitate the transmission of ideas across countries. We examine the impact of migrant exposure to reproductive health policies on origin-country fertility in the Philippines. We exploit temporal variation in destination-country reproductive health policies combined with spatial variation across Philippine provinces in their migration intensity and historical composition of migrant destinations. Migrant exposure to more liberalized reproductive health policies reduces origin-community fertility. This reduction is driven by increased adoption of modern contraceptives. Visible policy changes, such as commercial advertising of contraceptives, lead to this change in behavior. Firmly established family planning values moderate the fertility response. (JEL D91, F22, I18, J13, O15, O18, Z13)

We conduct a field experiment to quantify the impact of the lifting of the Saudi women's driving ban on women's employment by randomizing rationed spaces in driver's training. Treated women are 41 percent more likely to be employed yet are 19 percent less likely to be able to make purchases without family permission. Patterns of heterogeneous treatment effects reveal that these divergent impacts of access to driving are experienced by distinct subgroups of women. The results underscore the importance of intrahousehold responses that can counteract legal gains in women's freedoms. (JEL C93, D13, J16, J22, K38, O15, O17)

We use the tools of mechanism design combined with the theory of risk measures to analyze how a cash-constrained owner of an asset with known, stochastic returns raises capital from a population of investors who differ in their risk aversion and budget constraints. The issuer partitions the asset’s cash flow into several asset-backed securities, one for each type of investor. The optimal partition conforms to the commonly observed practice of tranching into senior debt, junior debt, and equity. Tranching arises endogenously due to the differences in risk appetites among agents and in the budget constraints they face. (JEL D81, D82, G12, G41, G51)

We present five facts from an experiment on the marginal propensity to consume (MPC) out of transitory transfers: (1) the one-month MPC on a cash-like transfer is 23 percent; (2) it is substantially higher (61 percent) on a transfer administered via a card where remaining funds expire after three weeks, inconsistent with money fungibility; (3) the consumption response is concentrated in the first three weeks; (4) MPCs vary with household characteristics but are high even for the liquid wealthy; (5) unconditional MPC distribution exhibits large variation. Our findings inform the design of stimulus policies and pose challenges to existing macroeconomic models. (JEL D12, D91, E21, G51, I38)

We study the Tutoring Online Program (TOP), where tutoring is entirely online and tutors are volunteer university students matched with underprivileged middle school students. We leverage random assignment to estimate effects during and after the pandemic (2020 and 2022), investigating channels of impact. Three hours of individual tutoring per week increased math performance by 0.22 SD in 2020 and 0.20 SD in 2022. Higher dosage yielded stronger effects, while group tutoring smaller effects. TOP enhanced students’ aspirations, socioemotional skills, and psychological well-being, but only during school closures. We also estimate the impact of TOP on tutors, finding an increase in empathy. (JEL I12, I21, I23, I26, I28)

We use public finance sufficient statistic approaches to characterize the welfare effects of “nudges,” such as simplified information and warning labels, in markets with taxes and endogenous prices. While many studies focus on average effects, we show that welfare also depends on how the nudge affects the variance of choice distortions, and average effects become irrelevant with zero pass-through or optimal taxes. We implement the framework with experiments evaluating automotive fuel economy labels and sugary drink health labels. Labels decrease purchases of low-fuel economy cars and sugary drinks but may decrease welfare because they increase the variance of choice distortions. (JEL D18, D62, D83, D91, H21, L62, L66)

School districts historically approached conflict resolution from the perspective that suspending disruptive students was necessary to protect their classmates, even if this caused harm to perceived offenders. Restorative practices (RP)—focusing on reparation, accountability, and shared ownership of disciplinary justice—are designed to address undesirable behavior without harming students. We study Chicago Public Schools’ adoption of RP and find that suspensions and arrests decreased, driven by effects for Black students. We find null effects on test score value added, ruling out meaningful average declines. We estimate a 15 percent decrease in out-of-school arrests, consistent with RP substantively changing student behavior. (JEL D63, D74, D91, I21, I28, J15, J16)

We develop a bottom-up approach to estimate the slope of the primitive form of the New Keynesian Phillips curve, which features marginal cost as the real activity variable. Using quarterly micro data on prices, costs, and output, we estimate dynamic pass-through regressions that identify the slope as a function of primitive parameters. We find a high slope for the cost-based Phillips curve, which contrasts with the low estimates of the conventional output gap–based formulation found in the literature. We reconcile by showing that the output elasticity of marginal cost is low, at least during moderate inflation periods (e.g., pre-pandemic). (JEL C51, E12, E23, E31, E32, L60)

This paper provides an economic perspective on data-driven innovation in digital products, focusing on the role of complex experiments in measuring and improving social impact. The discussion highlights how tools and insights from economics contribute to each stage of the innovation process. Key contributions include identifying problems, developing theoretical frameworks, translating goals into measurable outcomes, analyzing historical data, and estimating counterfactual outcomes. The paper also surveys recently developed tools designed to address challenges in designing and analyzing data from complex experiments. (JEL A11, D83, D91, I20, L80, O31, Q16)