Every year, 90 percent of Americans give money or time to charities. Is such generosity necessarily welfare enhancing? We present a theoretical framework that pinpoints two types of motivation: individuals like to give, e.g., due to altruism or warm glow, or individuals would rather not give but dislike saying no, e.g., due to social pressure. To distinguish the two types of motivation, we design a door-to-door fund-raising drive in which we vary the ability of households to seek or avoid a solicitor. Some households are informed about the exact time of solicitation with a flyer on the door-knob; thus, they can seek the fund-raiser if giving is welfare-enhancing, and avoid it if giving is welfare-decreasing. We find that the flyer reduces the share of households opening the door by 10 to 25 percent, suggesting that the average household seeks to avoid fund-raisers. Moreover, if the flyer allows checking a box for ‘Do Not Disturb ’ giving is 30 percent lower. The latter decrease is concentrated among donations smaller than $10. These findings suggest that both types of motivation affect charitable giving, with more evidence supporting the social pressure explanation. Combining reduced form insights from these treatments with data gathered from a complementary field experiment, we are able to structurally estimate altruism and social pressure parameters.

University of Chicago for comments. The opinions and conclusions expressed herein are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the Federal Government, the National Bureau of Economic Research, or any other institution with which the authors are affiliated. c2012 Goda, Manchester and Sojourner. All rights reserved. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Behavioral finance studies the application of psychology to finance, with a focus on individual-level cognitive biases. I describe here the sources of judgment and decision biases, how they affect trading and market prices, the role of arbitrage and flows of wealth between more rational and less rational investors, how firms exploit inefficient prices and incite misvaluation, and the effects of managerial judgment biases. There is need for more theory and testing of the effects of feelings on financial decisions and aggregate outcomes. Especially, the time has come to move beyond behavioral finance to social finance, which studies the structure of social interactions, how financial ideas spread and evolve, and how social processes affect financial outcomes.

Why do people vote? We argue that signaling utility plays a significant role in explaining voting behavior: people vote because others might ask. We construct a model in which individuals may derive pride from signaling to others that they voted and, conversely, feel shame or guilt from admitting that they did not vote. We design a field experiment that is tightly linked to this model and allows us to estimate the key parameters of the theory. In three inter-related treatments, we study the cost voters and non-voters of the 2010 congressional election are willing to incur to sort into and out of situations in which they might be asked whether they voted. We find that signaling utility significantly affects the sorting of non-voters. For a broad range of plausible values of lying cost, we estimate a value of voting ‘just because others will ask ’ of $10-$15. This value is sizeable enough to explain election turnout. Preliminary and incompete. Do not cite without permission. We thank the audiences at Berkeley (Haas),

Abstract: Perhaps the most powerful form of framing arises through reference dependence, wherein choices are made recognizing the starting point or a goal. In labor economics a form of reference dependence, income targeting, has been argued to represent a serious challenge to traditional economic models. We design a field experiment linked tightly to three popular economic models of labor supply— two behavioral variants and one simple neoclassical model—to deepen our understanding of the positive implications of the competing theories. Consistent with neoclassical theory and reference-dependent preferences with endogenous reference points, workers (vendors in open air markets) supply more hours when presented with an expected transitory increase in hourly wages. In contrast with the prediction of behavioral models, however, when vendors earn an unexpected windfall early in the day, their labor supply does not respond. A key feature of our market in terms of parsing the theories is that vendors do not post prices rather they haggle with customers. In this way, our data also speak to the possibility of reference-dependent preferences affecting other dimensions of labor supply. Our investigation again yields results that are in line with neoclassical theory, as transacted prices and other measures of bargaining patterns are unaffected by the unexpected windfall.

Abstract Randomization has emerged as preferred empirical strategy for researchers in a variety of fields over the past years. While the advantages of RCTs in terms of identification are obvious, the statistical analysis of experimental data is not without challenges. In this paper we focus on multiple hypothesis testing as one statistical issue commonly encountered in economic research. In many cases, researchers are not only interested in the main treatment effect, but also want to investigate the degree to which the impact of a given treatment varies across specific geographic or socio-demographic groups of interest. In order to test for such heterogeneous treatment effects, researchers generally either use subsample analysis or interaction terms. While both approaches have been widely applied in the empirical literature, they are generally not valid statistically, and, as we demonstrate in this paper, lead to an almost linear increase in the likelihood of false discoveries. We show that the likelihood of finding one out of ten interaction terms statistically significant in standard OLS regressions is 42%, and that two thirds of statistically significant interaction terms using PROGRESA data can be presumed to represent false discoveries. We demonstrate that applying correction procedures developed in the statistics literature can fully address this issue, and discuss the implications of multiple testing adjustments for power calculations and experimental design. While multiple testing corrections do require large sample sizes ex-ante, the adjustments necessary to preserve power when corrections are applied appear relatively small.

Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. IZA Discussion Paper No. 6699

Abstract: We use data from a field experiment at Kiva, the online microfinance platform, to examine the role of transactions costs and social distance in decision-making. Requests for loans are either written in English or another language, and our treatment consists of posting requests in the latter category with or without translation. We find evidence that relatively small transactions costs have a large effect on the share of funding coming from speakers of languages other than that in which the request was written. Social distance plays a smaller role in funding decisions.

This paper explores the limitations of intention-based social preferences as an explanation of gift-exchange between a firm and a worker. In a framework with one self-interested and one reciprocal player, gift-giving never arises in equilibrium. Instead, any equilibrium in a large class of multi-stage games must involve mutually unkind behavior of both players. Besides gift-exchange, this class of games also includes moral hazard models and the rotten kid framework. Even though equilibrium behavior may appear positively reciprocal in some of these games, the self-interested player never benefits from reciprocity. We discuss the relation of these results to the theoretical and empirical literature on gift-exchange in employment relations.

All parties involved in this research ensured that individual consumer information was anonymous and protected at all times. Consumers were identified using a unique ID, and data files were encrypted. The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Financial Conduct Authority (FCA). They do not. All errors or omissions are the authors ’ sole responsibility. The Occasional Paper series The FCA is committed to encouraging debate among academics, practitioners and policymakers in all aspects of financial regulation. To facilitate this, it publishes a series of Occasional Papers in financial regulation, extending across economics and other disciplines. These papers cover topics such as the rationale for regulation, the costs and benefits of various aspects of regulation, and the structure and development of markets in financial services. Since their main purpose is to stimulate interest and debate, the FCA welcomes the opportunity to publish controversial and challenging material, including papers that may have been presented or published elsewhere. The main factor in accepting papers, which are independently refereed, is that they should make substantial contributions to knowledge and understanding in the area of financial regulation. The FCA encourages contributions from external authors, as well as from its own staff. In either case, the papers will express the views of the author(s) and not those of the FCA. If you want to contribute to this series, please contact Peter Andrews or Stefan Hunt at, respectively: