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Giglio, Stefano; Maggiori, Matteo; Stroebel, Johannes
doi: 10.1093/qje/qju036pmid: N/A
We estimate how households trade off immediate costs and uncertain future benefits that occur in the very long run, 100 or more years away. We exploit a unique feature of housing markets in the United Kingdom and Singapore, where residential property ownership takes the form of either leaseholds or freeholds. Leaseholds are temporary, prepaid, and tradable ownership contracts with maturities between 99 and 999 years, while freeholds are perpetual ownership contracts. The price difference between leaseholds and freeholds reflects the present value of perpetual rental income starting at leasehold expiration, and is thus informative about very long-run discount rates. We estimate the price discounts for varying leasehold maturities compared to freeholds and extremely long-run leaseholds via hedonic regressions using proprietary data sets of the universe of transactions in each country. Households discount very long-run cash flows at low rates, assigning high present value to cash flows hundreds of years in the future. For example, 100-year leaseholds are valued at more than 10 less than otherwise identical freeholds, implying discount rates below 2.6 for 100-year claims. JEL Codes: G11, G12, R30.
Greenwood, Robin; Hanson, Samuel G.
doi: 10.1093/qje/qju035pmid: N/A
We study the link between investment boom and bust cycles and returns on capital in the dry bulk shipping industry. We show that high current ship earnings are associated with high used ship prices and heightened industry investment in new ships, but forecast low future returns. We propose and estimate a behavioral model of industry cycles that can account for the evidence. In our model, firms overextrapolate exogenous demand shocks and partially neglect the endogenous investment response of their competitors. As a result, firms overpay for ships and overinvest in booms and are disappointed by the subsequent low returns. Formal estimation of the model suggests that modest expectational errors can result in dramatic excess volatility in prices and investment. JEL Codes: E32, L16, G02.
Agarwal, Sumit; Chomsisengphet, Souphala; Mahoney, Neale; Stroebel, Johannes
doi: 10.1093/qje/qju037pmid: N/A
We analyze the effectiveness of consumer financial regulation by considering the 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act. We use a panel data set covering 160 million credit card accounts and a difference-in-differences research design that compares changes in outcomes over time for consumer credit cards, which were subject to the regulations, to changes for small business credit cards, which the law did not cover. We estimate that regulatory limits on credit card fees reduced overall borrowing costs by an annualized 1.6 of average daily balances, with a decline of more than 5.3 for consumers with FICO scores below 660. We find no evidence of an offsetting increase in interest charges or a reduction in the volume of credit. Taken together, we estimate that the CARD Act saved consumers 11.9 billion a year. We also analyze a nudge that disclosed the interest savings from paying off balances in 36 months rather than making minimum payments. We detect a small increase in the share of accounts making the 36-month payment value but no evidence of a change in overall payments. JEL Codes: D0, D14, G0, G02, G21, G28, L0, L13, L15.
Bloom, Nicholas; Liang, James; Roberts, John; Ying, Zhichun Jenny
doi: 10.1093/qje/qju032pmid: N/A
A rising share of employees now regularly engage in working from home (WFH), but there are concerns this can lead to shirking from home. We report the results of a WFH experiment at Ctrip, a 16,000-employee, NASDAQ-listed Chinese travel agency. Call center employees who volunteered to WFH were randomly assigned either to work from home or in the office for nine months. Home working led to a 13 performance increase, of which 9 was from working more minutes per shift (fewer breaks and sick days) and 4 from more calls per minute (attributed to a quieter and more convenient working environment). Home workers also reported improved work satisfaction, and their attrition rate halved, but their promotion rate conditional on performance fell. Due to the success of the experiment, Ctrip rolled out the option to WFH to the whole firm and allowed the experimental employees to reselect between the home and office. Interestingly, over half of them switched, which led to the gains from WFH almost doubling to 22. This highlights the benefits of learning and selection effects when adopting modern management practices like WFH. JEL Codes: D24, L23, L84, M11, M54, O31.
Bartling, Bjrn; Weber, Roberto A.; Yao, Lan
doi: 10.1093/qje/qju031pmid: N/A
This article studies socially responsible behavior in markets. We develop a laboratory product market in which low-cost production creates a negative externality for third parties, but where alternative production with higher costs mitigates the externality. Our first study, conducted in Switzerland, reveals a persistent preference among many consumers and firms for avoiding negative social impact in the market, reflected both in the composition of product types and in a price premium for socially responsible products. Socially responsible behavior is generally robust to varying market characteristics, such as increased seller competition and limited consumer information, and it responds to prices in a manner consistent with a model in which positive social impact is a utility-enhancing feature of a consumer product. In a second study, we investigate whether market social responsibility varies across societies by comparing market behavior in Switzerland and China. While subjects in Switzerland and China do not differ in their degree of social concern in nonmarket contexts, we find that low-cost production that creates negative externalities is significantly more prevalent in markets in China. Across both studies, consumers in markets exhibit less social concern than subjects in a comparable individual choice context. JEL Codes: C92, D03, D62, M14.
Caselli, Francesco; Morelli, Massimo; Rohner, Dominic
doi: 10.1093/qje/qju038pmid: N/A
We establish a theoretical and empirical framework to assess the role of resource endowments and their geographic location in interstate conflict. The main predictions of the theory are that conflict is more likely when at least one country has natural resources, when the resources in the resource-endowed country are closer to the border, and, in the case where both countries have natural resources, when the resources are located asymmetrically vis--vis the border. We test these predictions on a novel data set featuring oilfield distances from bilateral borders. The empirical analysis shows that the presence and location of oil are significant and quantitatively important predictors of interstate conflicts after World War II. JEL Codes: C23, D74, F51, H56, Q34.
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