(with Judd B. Kessler and Katherine L. Milkman), Revised Draft, June 2018
Forthcoming, Management Science
What motivates the rich and powerful to exhibit generosity? We explore this important question in a large field experiment. We solicit donations from 32,174 alumni of an Ivy League university, including thousands of rich and powerful alumni. Consistent with past psychology research, we find that the rich and powerful respond dramatically, and differently than others, to being given a sense of agency over the use of donated funds. Gifts from rich and powerful alumni increase by 100-350 percent when they are given a sense of agency. This response arises primarily on the intensive margin with no effect on the likelihood of donating. Results suggest that motivating the rich and powerful to act may require tailored interventions.
[Note: Previously circulated under the title Monthly Budgeting Heuristics: Evidence from 'Extra' Paychecks]
Working Paper, 2017
Households often receive income and make consumption decisions at different frequencies. This can cause predictable variation in the amount of income received per consumption decision period. The life-cycle/permanent income hypothesis predicts that consumption should not respond to such variation. I test this prediction by exploiting variation in monthly income arising from the timing of bi-weekly pay schedules. Bi-weekly workers receive two paychecks per month with the exception of two months out of the year, during which they receive three. Using data from the Consumer Expenditure Survey, I find evidence of excess sensitivity to these third paychecks. Durable spending increases by roughly 31 percent following months with three paychecks. There is no corresponding response in non-durable consumption. I discuss whether the empirical findings can be reconciled with several extensions to the standard consumption model, including liquidity constraints, mental accounting, and budgeting heuristics.
Working Paper, 2018
(with Jeffrey Hemmeter, Judd B. Kessler, Robert D. Metcalfe, and Robert Weathers)
There is growing interest in the potential for behavioral interventions to motivate behavior in policy settings. We study a large-scale (n=50,000) field experiment implemented by the Social Security Administration on one such “nudge” aimed at increasing the timely and accurate self-reporting of wages by Supplemental Security Income (SSI) recipients. Sending a letter reminding SSI recipients of their wage reporting responsibilities significantly increased the likelihood of reporting any earnings and the amount of reported earnings in the three months immediately following the intervention. We observe only mild post-intervention persistence, however, with the immediate relative effect of the letter decaying slightly over time. While we find a robust effect of the reminder letter, the specific content of the letter—providing social information or highlighting the salience of penalties—had no systematic effect on behavior. We estimate that the letters generated roughly $9.40 in savings per dollar spent.
(with Jennifer K. Lyu and Abigail B. Sussman)
(with Abigail B. Sussman) in C. Chaffin (Ed.), Client Psychology, New York: Wiley, 2018