Can public policies change risk preferences? The effect of property titling on risk aversion
Fernando M. Aragon, Oswaldo Molinaz, & Ingo W. Outes-Leon
Abstract: Evidence suggests that major events, like war or natural disasters, affect risk preferences. This paper shows that similar effects can also be caused by public policies. Using the case of a large titling program in Peru, we find that this policy reduced risk aversion. The effects are sizeable and seem to be driven by the reduction in background risk associated with improved security of tenure. Our results highlight the potential of public policies to affect human behavior not only by shaping the economic environment, but also by changing individual preferences.
How Do Peers Impact Learning? An Experimental Investigation of Peer-to-Peer Teaching and Ability Tracking
Erik O. Kimbrough, Andrew D. McGee, & Hitoshi Shigeoka
Abstract: Classroom peers are believed to influence learning by teaching each other, and the efficacy of this teaching likely depends on classroom composition in terms of peers’ ability. Unfortunately, little is known about peer-to-peer teaching because it is never observed in field studies. Furthermore, identifying how peer-to-peer teaching is affected by ability tracking—grouping students of similar ability—is complicated by the fact that tracking is typically accompanied by changes in curriculum and the instructional behavior of teachers. To fill this gap, we conduct a laboratory experiment in which subjects learn to solve logic problems and examine both the importance of peer-to-peer teaching and the interaction between peer-to-peer teaching and ability tracking. While peer-to-peer teaching improves learning among low-ability subjects, the positive effects are substantially offset by tracking. Tracking reduces the frequency of peer-to-peer teaching, suggesting that low-ability subjects suffer from the absence of high-ability peers to teach them.
Shades of Grey: Business Compliance with Fiscal and Labour Regulations
Katherine Cuff, Steeve Mongrain, & Joanne Roberts
Abstract: Firms face many legal regulations, including corporate tax laws and labour laws. There are many ways for firms to evade these legal requirements. Firms may employ workers informally to skip out on safety or health standards or to avoid paying payroll taxes. Firms may also misreport sales transactions to minimize sales or business tax liabilities. Much of the literature examining firm behaviour assumes that a firm's decision to evade one type of regulation (such as labour regulation) is perfectly linked to the decision to evade another (such as corporate income taxes). In this paper, we separate these two evasion decisions and allow firms to decide whether to evade labour market regulations (including the payment of payroll taxes) independently from their decisions to evade business taxes. We find that the design of the tax system and firm entry decisions generate both positive and negative correlations between these two evasion decisions. We characterize the firms’ optimal entry and evasion behavior and derive the government's optimal tax policies. A pure pro t tax system with no payroll tax system, which is optimal in absence of business tax evasion, is no longer desirable when such evasion must be considered.