This paper documents how extensive economic education can reduce the risk of getting into financial problems by comparing people who enter business and economics programs with people who enter other higher education programs. To identify the causal effect, I exploit GPA admission thresholds that quasi-randomize applicants near the thresholds into different programs. I find that admission to an economics education significantly reduces the probability of loan default by one-half. This large reduction in the default probability is associated with changes in financial behavior, but it is not associated with differences in the level or stability of people’s income.
VoxEU] [NBER Digest]
We link survey data containing Danish people’s perceptions of where they rank in various reference groups and fairness views with administrative records on their income history, life events, and reference groups. People know their income positions well, but believe others are closer to themselves than they really are. The perceived fairness of inequalities is strongly related to current social position, moves with shocks to social position (e.g., unemployment or promotions), and changes when people are experimentally shown their actual positions. People view inequalities within education group and co-workers as most unfair, but underestimate inequality the most exactly within these reference groups.
Work in progress
Who commits crime? Theoretically, risk tolerant and impatient people are more likely to commit crime because they care less about the risks of apprehension and punishment than other people. By linking experimental data on risk tolerance and patience of young men to administrative crime records, we find empirical support for this hypothesis. For example, crime rates are 8-10 pp. higher for the most risk tolerant people compared to the most risk averse. An implication is that those who commit crime are also those who are least responsive to stricter law enforcement. Risk tolerance and impatience are, in particular, predictive of property crime while self-control is a stronger predictor of crimes of passion (violent, drug, and sexual offenses).