C - Mathematical and Quantitative Methods
Mathematical and Quantitative Methods
In relational contracting the threat of punishment in future periods provides an incentive to not to cheat. However, to what extent do people actually carry out this punishment? We compare relational contracting patterns in Ghana and the United Kingdom by conducting a repeated principal agent lab experiment, framed in a labour market setting. Each period, employers make offers to workers, who can choose to accept or reject this offer and, after accepting and being paid, what effort to exert. The employers and workers interact repeatedly over several periods.
Firm surveys have shown that labour management in developing countries is often problematic. Earlier experimental research (Davies & Fafchamps, 2017) has shown that managers in Ghana are reluctant to use monetary incentives to motivate workers. This paper presents the results from a giftexchange game experiment in Ghana in which the worker can make a promise to the employer before a contract is offered (ex ante communication) and in which the employer can send negative or positive feedback to the worker after the worker has chosen effort (ex post communication).
We experimentally test the impact of expanding access to basic bank accounts in Uganda, Malawi, and Chile. Over two years, 17 percent, 10 percent, and 3 percent of treatment individuals made five or more deposits, respectively. Average monthly deposits for them were at the 79th, 91st, and 96th percentiles of baseline savings. Survey data show no clearly discernible intention–to–treat effects on savings or any downstream outcomes.
Agents often use noisy signals from their neighbors to update their beliefs about a state of the world. The effectiveness of social learning relies on the details of how agents aggregate information from others. There are two prominent models of information aggregation in networks: (1) Bayesian learning, where agents use Bayes’ rule to assess the state of the world and (2) DeGroot learning, where agents instead consider a weighted average of their neighbors’ previous period opinions or actions.
The welfare impact of expanding access to bank accounts depends on whether accounts crowd out pre-existing financial relationships, or whether private gains from accounts are shared within social networks. To study the effect of accounts on financial linkages, we provided free bank accounts to a random subset of 885 households. Within households, we randomized which spouse was offered an account and find no evidence of negative spillovers to spouses.
A large literature examines performance pay for managers in the private sector, but little is known about performance pay for managers in public sector bureaucracies. In this paper, we study performance incentives rewarding school administrators for reducing anemia among their students. Randomly assigning 170 schools to three performance incentive levels and two orthogonal sizes of unconditional grants, we analyze performance pay and its complementarity with discretionary resources.
The paper reports the result of an experimental game on asset integration and risk taking. We and some evidence that winnings in earlier rounds affect risk taking in subsequent rounds, but no evidence that real life wealth outside the experiment affects risk taking. Controlling for past winnings, participants receiving a low endowment in a round engage in more risk taking. We test a 'keeping-up-with-the-Joneses' hypothesis and and some evidence that subjects seek to keep up with winners, though not necessarily average earnings.
Which budgetary institutions result in efficient provision of public goods? We analyze a model with two parties bargaining over the allocation to a public good each period. Parties place different values on the public good, and these values may change over time. We model budgetary institutions as the rules governing feasible allocations to mandatory and discretionary spending programs.
Regular use of effective health-products such as insecticide-treated mosquito nets (ITN) by a household benefits its neighbors by (a) reducing chances of infection and (b) raising aware ness about product-effectiveness, thereby increasing product-use. Due to their potential social benefits and high purchase price, causing free-riding and sub-optimal private procurement, such products may be subsidized in developing countries through means-testing.
We use detailed observational data constructed from daily passenger-level logbooks and weekly surveys to study the intertemporal labor supply decisions of Kenyan bicycle taxi drivers, while generating variation in cash on hand through randomized cash payouts. We document three key facts: (1) drivers work more in response to both unexpected and expected cash needs; (2) drivers discontinuously increase the probability of quitting once they have reached their day’s cash need; but (3) randomized cash payouts have no effect on labor supply.