Research and Publications - Department of Economics, Finance & Legal Studies

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    Evaluating Life Expectancy Evaluations
    (Routledge, 2018) Bauer, Daniel; Fasano, Michael V.; Russ, Jochen; Zhu, Nan; University of Alabama Tuscaloosa; Ulm University; Pennsylvania State University; Pennsylvania State University - University Park
    The quality of life expectancy estimates is one key consideration for an investor in life settlements. The predominant metric for assessing this quality is the so-called A-to-E ratio, which relies on a comparison of the actual to the predicted number of deaths. In this article, we explain key issues with this metric: In the short run, it is subject to estimation uncertainty for small and moderately sized portfolios; and, more critically, in the long run, it converges to 100% even if the underwriting is systematically biased. As an alternative, we propose and discuss a set of new metrics based on the difference in (temporary) life expectancies. We examine the underwriting quality of a leading U.S. life expectancy provider based on this new methodology.
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    Testing for crowd out in social nudges: Evidence from a natural field experiment in the market for electricity
    (National Academy of the Sciences, 2019) Brandon, Alec; List, John A.; Metcalfe, Robert D.; Price, Michael K.; Rundhammer, Florian; University of Chicago; Boston University; University of Alabama Tuscaloosa; Georgia State University
    This study considers the response of household electricity consumption to social nudges during peak load events. Our investigation considers two social nudges. The first targets conservation during peak load events, while the second promotes aggregate conservation. Using data from a natural field experiment with 42,100 households, we find that both social nudges reduce peak load electricity consumption by 2 to 4% when implemented in isolation and by nearly 7% when implemented in combination. These findings suggest an important role for social nudges in the regulation of electricity markets and a limited role for crowd out effects.
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    Minimum Wage Changes across Provinces in China: Average Treatment Effects on Employment and Investment Decisions
    (MDPI, 2021) Luo, Ji; Henderson, Daniel J.; Nankai University; University of Alabama Tuscaloosa; IZA Institute Labor Economics
    We exploit data from the China Household Finance Survey to examine the impact of changes in the minimum wage on employment and investment decisions. We are able to non-parametrically identify the average treatment effect on the treated via exogenous variation in the minimum wage across provinces. We find that changes in the minimum wage had no adverse effects on employment (in terms of days worked per month or hours worked per work day) but found evidence that changes in the minimum wage impacted the percentage of families that had a bank account, a family in a rural area owned their home, and whether families (whose highest level of education was primary school) planned to purchase a home.
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    Pull-to-center is not just for newsvendors
    (PLOS, 2022) Brokesova, Zuzana; Deck, Cary; Peliova, Jana; University of Economics Bratislava; University of Alabama Tuscaloosa
    The pull-to-center effect is a systematically observed suboptimal behavior in newsvendor experiments. Various explanations have been forward for this phenomenon, some of which are based on structural properties of the task while others are based upon the inventory context of the problem. To help distinguish between these two types of explanations, we compare behavior in a newsvendor game to behavior in a new, mathematically isomorphic, price gouging game. Our laboratory experiments replicate the standard results for newsvendors and yield the equivalent pattern in the price gouging game. This suggests previously observed newsvendor behavior is driven by structural aspects of the task consistent with models like prospect theory and impulse balance rather than context specific explanations pertaining to inventory management.
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    Do participation rates vary with participation payments in laboratory experiments?
    (University of Alabama Libraries, 2024) Zhong, Huizhen; Deck, Cary; Henderson, Daniel
    This paper reports a series of experiments designed to evaluate how the advertised participation payment impacts participation rates in laboratory experiments. Our initial goal was to generate variation in the participation rate as a means to control for selection bias when evaluating treatment effects in common laboratory experiments. Initially, we varied the advertised participation payment to 1734 people from $5 to $15 using standard email recruitment procedures, but found no statistical evidence this impacted the participation rate. A second study increased the advertised payment up to $100. Here, we find marginally significant statistical evidence that the advertised participation payment affects the participation rate when payments are large. To combat skepticism of our results, we also conducted a third study in which verbal offers were made. Here, we found no statistically significant increase in participation rates when the participation payment increased from $5 to $10. Finally, we conducted an experiment similar to the first one at a separate university. We found no statistically significant increase in participation rates when the participation payment increased from $7 to $15. The combined results from our four experiments suggest moderate variation in the advertised participation payment from standard levels has little impact on participation rates in typical laboratory experiments. Rather, generating useful variation in participation rates likely requires much larger participation payments and/or larger potential subject pools than are common in laboratory experiments.