Working Paper

Survey Evidence on Habit Formation: Existence, Specification, and Implication (Job Market Paper) [Paper]
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.


A Social Interaction Model with Ordered Choices, with Xiaodong Liu, Economics Letters, 2017. [Paper] [Appendix]
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.

Research Papers

Efficiency Wages and the Cost of Business Cycles [Paper]
In many macroeconomic models, the cost of business cycle fluctuations is too small to justify the enormous effort being put into stabilization policies. This paper proposes efficiency wage as a new explanation for the observed large cost of business cycles. When high unemployment makes jobs more valuable, employed workers work harder to keep their jobs, making it less necessary for firms to use high wages to elicit efforts from their workers. Changes in wages eventually translate into changes in prices, and high unemployment is therefore not as disinflationary as low unemployment is inflationary, implying a higher cost of business cycles.

Measuring Altruism [Paper]
Altruism relates to the main goal of socialization, to a core attribute of personality, and to theories concerned with human nature (Krebs, 1970). However, little economic literature has directly measured altruism. Does altruism exist in people’s economic behavior? Does it vary systematically with relationships and demographics? Utilizing the Health and Retirement Study’s rich information on altruistic behavior, I structurally estimate a measure of altruism and find that altruism exists and that after controlling for demographics and behavior, the level of altruism increases with the intimacy of relationships. Senior white people who are healthier and have more children are more altruistic than others. People measured as being more selfless tend to retire later, to save more before retirement and for precautionary purposes, to be more likely to leave a bequest greater than $10,000, to transfer more than $500 to children while alive, and to spend more than 100 hours helping a grandchild.

Works in Progress

Elections and Happiness with Miles Kimball, Fumio Ohtake, Collin Raymond, Yoshiro Tsutsui, Junya Zhou
Dynamic response of happiness to election outcomes and dynamic theories of happiness.

Habit Formation Preferences Consistent with Survey Evidence: Axiomatics and Implications
What do micro-consistent habit formation preferences look like and imply?