Analyses of self-reported-well-being (SWB) survey data may be confounded if people use response scales differently. We use calibration questions, designed to have the same objective answer across respondents, to measure dimensional (i.e., specific to an SWB dimension) and general (i.e., common across questions) scale-use heterogeneity. In a sample of ~3,350 MTurkers, we find substantial such heterogeneity that is correlated with demographics. We develop a theoretical framework and econometric approaches to quantify and adjust for this heterogeneity. We apply our new estimators in several standard SWB applications. Adjusting for general-scale-use heterogeneity changes results in some cases.
Habit formation is a staple of macroeconomics and finance, but insufficient micro evidence has led to controversies over its existence, specification, and implication. This paper documents new and extensive micro evidence for habit formation, through survey experiments eliciting ten preference parameters informative about habit formation. The evidence suggests that habit forms both internally and externally, depreciates by around two-thirds annually, and has an about equisized welfare impact as peer effect. I also propose and implement the first set of formal tests of additive and multiplicative habits and find that these ubiquitous preferences are rejected. Evidence-based simulations show that combining habit formation with peer effect could explain the Easterlin paradox.
We introduce a social interaction model with ordered choices. We provide a micro foundation for the econometric model based on an incomplete information network game and characterize the sufficient condition for the existence of a unique equilibrium of the game. We discuss the identification of the model and propose to estimate the model by the NFXP and NPL algorithms. We conduct Monte Carlo simulations to investigate the finite sample performance of these two estimation methods.
Work in Progress
Cost of Business Cycles When Unemployment Is a Worker Discipline Device
Elections and Happiness, with Miles Kimball, Collin Raymond, Junya Zhou, Fumio Ohtake, Yoshiro Tsutsui.
Habit Formation Preferences Consistent with Survey Evidence: Axiomatics and Implications