Behavioral nudges in the form of peer-comparison information have, in many cases, proven effective in promoting pro-social behavior. The most prominent example is the use of home energy reports in electricity markets. While there is evidence that peer comparisons can induce reductions in externality-generating consumption, it is not clear through which channels the nudges operate. One possible channel is pecuniary: peer comparisons may make consumption choices more salient and prompt discovery of opportunities for financial savings. The other is non-pecuniary: peer comparisons may trigger moral motives such as guilt, social conformism, or social competitiveness. This study uses a controlled posted-price market experiment with externalities. We eliminate the “discovery” channel present in field settings by making financial incentives fixed and known. The experiment thus controls the pecuniary channel, leaving only the non-pecuniary, “moral” channel. We find that the nudge still enhances pro-social behavior, pointing to the moral channel’s importance. Two additional findings are that the nudge is equally effective across the treatments with low and high market prices (indicating that nudges and financial incentives neither complement nor crowd each other out) and that the nudge is more effective for participants with relatively cooperative worldviews.
By institutionally rethinking the Solow residual in light of how the interplay of policy interventions and market forces affects factor income shares, we attempt to interpret China’s TFP performance from an institutional perspective. To explore the growth–efficiency paradox inherent in the China model of growth, we apply the Jorgensonian APPF–Domar growth accounting framework to the revised and updated CIP/China KLEMS dataset. The framework coherently integrates industry productivity accounts with national accounts to distinguish TFP growth caused by changes in factor utilization within industries from TFP growth caused by changes in factor reallocation between industries. By regrouping 37 Chinese industries according to their distance from state controls (or, conversely, their proximity to final demand) and dividing the entire 1978–2023 period into subperiods to reflect major policy and institutional changes and external shocks, we show that capital reallocation brought about strong TFP gains when both the government and the market happened to address similar structural problems, but policy efforts toward growth inevitably led to efficiency losses and ultimately hindered China’s growth.
We study the extent of a one-size-fits-all approach in the design of public procurement (PP) tenders using comprehensive data from Finland. We show that crucial PP design features related to auction and contract rules tend to have significant lack of variation across different tenders for different industries within a contracting authority. We show that this organizational rigidness is due to both organizational level culture and individual employee level work habit formation with the latter being more important. We find that both greater organizational rigidity and deviating from the national industry norms are associated with lower number of bids and higher probability of zero-bid tenders, pointing to a potential efficiency loss from organizational rigidness in PP, and offering a solution that buyers could mimic how other organizations typically buy similar products rather than how they themselves buy very different products.
Herd behavior is a well-documented phenomenon in economics, yet little is known about whether people follow the general crowd or those who are most similar to them. This paper asks a simple but critical question: who do individuals really follow in a time of crisis? Using data from the European Social Survey combined with vaccination records across 15 countries, we examine how COVID-19 vaccination decisions were shaped by peers. We find that individuals’ willingness to vaccinate is driven far more strongly by their age-group peers than by the broader population, with the effect holding across most age groups. Moreover, our results reveal a U-shaped relationship between the share of vaccinated peers and individual vaccination intentions, suggesting that social norms reinforce peer effects once vaccination reaches a critical mass. These results highlight the perception that herd behavior is not just about the size of the herd; similarity is central to social learning and decision-making under uncertainty, with important implications for public health strategies and beyond. Regarding vaccination operations, these results indicate that mobilizing age-specific leaders, influencers, or social networks can help establish a herd within high-risk groups. More generally, as social learning appears to be most effective among individuals with shared characteristics, interventions designed to increase compliance may be more successful when targeted to specific peer groups rather than the general public.
This paper investigates how the COVID-19 pandemic affected Italian firms’ expectations regarding future growth and prices, and the link between firm-level uncertainty and forecast errors. Using firm-level panel data from the Bank of Italy’s INVIND survey, we document that growth-expectation formation is stable across nearly three decades, including the COVID-19 pandemic, and that growth forecasts retain predictive content for realized outcomes in every year of the sample. Firms’ self-reported uncertainty about growth is informative about forecast accuracy in crisis years but not during 2020–2021, when uncertainty was driven by a common aggregate shock. At the aggregate level, cross-sectional disagreement among firms predicts the dispersion of subsequent realized outcomes, with predictability running only from expectations to outcomes. Workforce shortages are the dominant channel through which the pandemic disrupted firm expectations, more relevant than demand, supply, or financial channels. The price domain differs from real growth, with the response of expected prices to realized prices weakening during the late 1990s, the 2008–2009 financial crisis, and the 2022 inflation surge, while subjective price uncertainty remains a stable predictor of forecast errors.
We evaluate the First-Generation Graduate Scholarship scheme implemented in the Indian state of Tamil Nadu, which waives tuition fees for first-generation college students in technical education. The scheme represents a large-scale non-identity-based affirmative action policy in higher education, using first-generation status as the basis for eligibility. Using household survey data in difference-in-differences (DiD) and synthetic DiD frameworks, we find substantial improvements in enrollment, stream choice, and graduation in technical courses, with downstream effects on regular employment, occupational choices, and household welfare. Male students gained more than female students. The scheme also increased reliance on education loans to cover residual costs. The findings suggest that policies based on first-generation status can promote intergenerational mobility by expanding higher education access and improving labour market outcomes.
In the context of an epidemic where the risk of death post-infection depends on demography and social behaviour, this paper characterises how the degree of congestibility of the social environment and the public/private nature of the available information about health states jointly affect the strategic social distancing of demographically heterogeneous agents. Key result is that the joint presence of congestibility and private information is necessary and sufficient for social-distancing decisions to be strategic complements. Strategic substitutability ensues in every other case. Within the limits of the proposed model, the analysis provides a sound theoretical rationale for the heterogeneity in the results provided by the extant literature on the issue. Implications ensue for optimal information design. First: limiting private information (e.g. by forbidding self-tests) is always socially optimal. Second: if private information cannot be limited, the second-best policy crucially depends on environmental congestibility: with high congestibility, providing the maximum extent of public information (e.g. via mass screening campaigns) is desirable, whereas the converse is true with low congestibility.
News shocks are often characterized as a form of external uncertainty, which could drive consumer behavior by shaping cognitive processes. However, news coverage often coincides with real-world events, making it difficult to identify whether observed effects are driven by the news itself or by the underlying events. Based on the announcement of the planned release of ALPS-treated water from Fukushima, news concerning future events, this paper identifies the economic consequences of news shocks and incorporates salience theory into international trade. Applying a difference-in-difference method, we find that Pacific Rim countries and regions near Japan experienced a significantly greater decrease in seafood exports than those further away in the post-news period. The negative effects could be attributed to demand-side factors, including consumer sensitivity to news, heightened fear of unknown risks, and a shift toward substitute products.
This study investigates the impact of climate change on intimate partner violence attitudes in Bangladesh and shows that policy can mitigate much, if not all, of the harmful consequences of climate shocks on women. Utilizing a novel dataset linking geo-referenced meteorological data with information on women’s attitudes, we find that dry shocks increase tolerance for intimate partner violence among women in poor and agriculture-dependent communities, with suggestive evidence that this happens due to the erosion of women’s outside options. Distributed-lag estimates show that these effects persist beyond the immediate period of exposure, consistent with a gradual weakening of women’s fallback positions rather than a purely short-run stress-induced or backlash response. Climate resilience projects funded by the Bangladesh Climate Change Trust (BCCT), a domestic climate fund, mitigate the negative impacts of dry shocks, highlighting the significant role of such initiatives in generating positive ameliorative spillover effects. Remotely sensed data on land use and crop-yield indicators reveal that these projects protect agriculture during dry shocks, especially in the rainfed Aman season, thus providing a credible test of the importance of the agricultural transmission channel and the pathway through which such projects buffer climate shocks. Our findings underline the crucial role of targeted policies in fostering climate adaptation.
We examine whether preventive health care uptake varies with cultural background related to patience and risk-taking. We combine individual-level survey data on preventive care use from 27 European countries with country-level preference measures from the Global Preferences Survey. To reduce confounding from institutional and economic correlates of culture, we focus on second-generation immigrants, who were born and currently reside in the same country – and thus face the same health care system and broad economic environment – but differ in inherited cultural background through their parents’ countries of origin. We find that respondents from more patient cultural backgrounds are more likely to use preventive services, while those from more risk-tolerant backgrounds are less likely to do so. These patterns appear across multiple preventive care outcomes.
We propose a novel game, the Dictatorial Public Goods Game, to study the interplay between collective resource generation and centralized provision of public goods. After making choices in a standard Voluntary Contribution Mechanism (VCM), one player is selected from the group to administrate the contributions: either provide the public good or expropriate the collected resources for personal gain. We find that adding this centralized mechanism reduces efficiency compared to the standard VCM. Although higher contributions increase the material incentive to expropriate, they lead to more provision. Thus, pro-social choices in the contribution and in the provision stages act as complements, reflecting the generation of social capital in the group. Administrators tend to provide more when the statutory default is expropriation rather than provision. This counter status-quo effect is in line with the standard provision-maintenance gap in the literature, but is not explained by the theoretical arguments typically invoked to explain such framing effects.
This study examines the causal effect of PM2.5 air pollution exposure on premature mortality in Southern European cities from 2010 to 2018. We leverage local variations in precipitation and wind speed as a source of random variation in PM2.5 exposure. Using the Two-Sample Two-Stage Least Squares (TS2SLS) estimator to reconcile monitoring station-level and city-level data, our findings reveal a statistically significant increase in premature mortality caused by PM2.5. According to our preferred specification, a 1% increase in PM2.5 causes a 0.82% rise in the under-65 mortality rate and a 0.93% rise in the infant mortality rate. The results are robust to alternative specifications. The most affected populations are those residing in urban areas (relative to suburban areas) and those living in cities located in richer regions (as opposed to poorer ones). We also examine the role of additional pollutants, finding further evidence for the importance of particulate matter.
We study whether competition between groups that yields no material rewards fosters within-group cooperation. In a laboratory experiment, pairs of subjects played an indefinitely repeated Prisoner’s Dilemma either in isolation or in a tournament against another pair, where winning conferred no monetary payoff. The competitive environment increased cooperation, and the effect strengthened over time as subjects gained experience. Exploiting the binary action space of the repeated game, we estimate participants’ strategies and find that the tournament reallocates play away from strategies that start with defection toward strategies that start with cooperation. This reallocation results in a shift from Always Defect to the least risky cooperative strategy, Grim. We complement the experiment with a simple tournament-based model that shows how non-monetary competition can shift equilibrium selection toward cooperative strategies.
We study how localized gasoline price shocks affect household consumption by linking high-frequency bank transaction data with station-level fuel prices. A 1% increase in local gasoline prices reduces monthly household spending by approximately 0.13%, even after controlling for national fuel price movements. We identify two mechanisms. First, spending declines are larger among fuel-dependent, low-liquidity households, consistent with a budget-constraint channel. Second, highly visible local price spikes reduce spending even among non-car households, consistent with a price-salience channel. We further show that localized gasoline price shocks amplify consumption inequality: low-income households with high fuel exposure experience the largest reductions, particularly in discretionary spending. Our findings show that localized energy price fluctuations shape household consumption through both financial constraints and behavioral responses to salient price signals.
We conduct an artefactual field experiment in real-existing trade networks to analyze how individual network degree affects bargaining demands and outcomes. We combine data from a bilateral bargaining experiment with data of trade networks in 24 villages in Uganda. To identify the effect of individual degree in the village trade network we experimentally vary the disclosure of participants' identities in a bargaining pair. We state hypotheses on how degree will affect behavior and find partial support for them. Specifically, we observe that individual degree affects bargaining demands in the predicted direction when one of the bargainers is informed about the network positions but not when either no or both sides are informed. Moreover, network degree affects the likelihood of agreements and earnings, irrespective of the knowledge of the network positions of bargaining partners.
Discouraged workers are those who have given up searching for work because of the (perceived) low chances of receiving job offers. In this article we develop a stochastic structural econometric framework for analyzing discouraged worker behavior based on the theory of job search and the notion of probabilistic rationality and risky choice. Subsequently, we conduct an empirical analysis of immigrant women from non-Western countries and women born in Norway, using microdata on labor force participation and unemployment. We find that the discouraged worker effect is particularly high among immigrant women with low wage rates and many children.
The paper presents a novel strategic analysis of narcoterrorism where a weak developing country’s terrorist group extorts home drug farmers to finance terror attacks. A developed country’s counterterror actions are motivated by the harm its residents endure from those attacks. The developed country’s counterterrorism involves efforts to destroy the drug crop abroad. The analysis begins with the drug price being exogenously fixed, followed by a “large-country case’’ with a market-determined drug price. The extension introduces a fourth participant, consisting of the developed country’s consumers whose purchases determine the drug demand. A subsequent extension allows for two drug-exporting countries along with their resident terrorist groups. Now, the drug price depends on terrorists’ extortion rates and the developed country’s counterterrorism associated with the two drug-exporting countries. With the last extension, novel drug-based counterterror transfers of terrorism occur between the drug-producing countries. For alternative scenarios, we show the key influence of the elasticity of the farmers’ counterterror resilience on the extortion rate and terrorism level.
