Behavioral Economics, Experimental Economics, Applied Micro Theory, Development Economics
This paper develops a theory of optimal goal bracketing with present bias and tests the predictions of the model in an online real-effort experiment. In our multi-selves model, the long-run self who faces a self-control problem caused by present bias sets goals as reference points to motivate the short-run selves. Narrow bracketing is defined as setting one goal for each short-run self and broad goal-setting is defined as setting one broad goal for several short-run selves to jointly achieve. The main trade-off is between commitment and flexibility. Narrow goal-setting provides more commitment but broad goal-setting is better in terms of flexibility. In line with the predictions of the model, the results of our online experiment show that 1) “Nudging” subjects to set narrow goals facilitates self-control. 2) The assumption that goals work as reference points is supported by empirical evidence. 3) Subjects who are more present-biased benefit more from goal-setting. 3) Broad goal-setting does not work. It also causes procrastination: subjects exert more efforts on the later date under broad goal-setting. 4)Surprisingly, but consistent with the model, we find that narrow goal-setting always outperforms broad goal-setting from the long-run self’s perspective regardless of the degree of present bias. However, the gap between the two bracketing methods shrinks as present bias decreases, indicating that the trade-off between commitment and flexibility does exist.
There is a growing body of experimental evidence indicating that delegation can foster the shifting of responsibility for unpopular actions from a principal to an agent. Using the well-known episode of the one-child policy in China (OCP), we provide field evidence for responsibility shifting through delegation. We compare the impact of the OCP on parents who experienced OCP during 1979-1990 (Phase I) when local governments were the primary enforcer versus 1991-2015 (Phase II) when the enforcement of the policy was delegated to the civilians, by incentivizing them to report their neighbors’ violations of the policy. Building on Li and Wu (2011) and Wei and Zhang (2011a), our identification strategy exploits the exogeneity of the gender of first-born children and argues that parents whose first-born is a girl are more likely to violate the OCP because of traditional Chinese “at least one son” preference. Consistent with the predictions of responsibility-shifting theory, we find that parents who were more exposed to OCP in Phase II currently trust their neighbors less and, this effect is exacerbated for those parents whose first-born was a girl. The OCP exposure does not undermine trust in local governments. However, parents strongly exposed to OCP in Phase I currently trust their local governments less and, again, it is the parents whose first child was a girl who are more strongly impacted. The OCP exposure does not matter for trust in neighbors in that phase. We explore three alternative interpretations of the results, none of them can account for these findings.
The Crowding-out Effect of Formal Insurance on Informal Risk Sharing: An Experimental Study, Games and Economic Behavior, 2014. (joint with Wanchuan Lin and Juanjuan Meng.)
This paper investigates the crowding-out effect of formal insurance on informal risk-sharing arrangements via theory and laboratory experiment. Our model and simulation predict that the crowding out of private transfers is often more than one-for-one and will reduce the total risk coverage. Furthermore, the existence of a moderate degree of altruism exaggerates the crowding-out effect, especially when there is an ex-ante income inequality. These predictions are mostly supported by the laboratory experiment, except that the crowding-out effect is not more than one-for-one, and hence the total risk coverage is not significantly reduced by formal insurance.