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Essays in Behavioral Labor and Health Economics

  • Author(s): Cooper, Michael Thomas
  • Advisor(s): Kuhn, Peter;
  • Oprea, Ryan
  • et al.
Abstract

This dissertation consists of three essays that analyze the impact of behavioral biases on labor market and health outcomes. The essays use tools from both experimental economics and applied econometrics. The common thread that runs through this research agenda is the goal of understanding how biases and suboptimal behaviors impact long-term outcomes crucial to well-being: labor market and health outcomes.

The first essay asks whether dismissal threats are more motivating than other types of incentives. In a laboratory experiment, workers earn a fixed wage per period and complete real effort tasks to reduce their chance of being fired at the end of each period. Behavioral motivators are purposefully activated in addition to monetary incentives. The design innovates on previous literature by implementing dismissal threats in a quantifiable way and by collapsing preference elicitation over incentive along with random assignment to incentives into the same round. The experiment produces two main results. First, workers produce significantly more output under dismissal threats than they do under piece rates, even though the marginal benefit of output is lower. Second, the productivity gains from strengthening dismissal threats on the margin have a large self-selection component but significant heterogeneity in pure incentive effects. Workers who prefer higher pay with steeper dismissal threats appear to respond positively to this environment, but these high-pressure incentives backfire among workers who want to avoid them.

The second essay implements a lab experiment to investigate the effects of self-image concerns on search behavior. Subjects play a simple sequential search game in which they decide how many times to search for a wage offer before giving up. Feedback from search contains both instrumental information about search prospects and signals about subjects' relative performance on an intelligence test taken earlier in the experiment. Treatments isolate and shut down two mechanisms: biased belief updating and information avoidance. Despite replicating results from the literature on overconfidence in incentivized reporting of initial beliefs, subject search behavior does not differ between treatments with or without self-image concerns during search. These results seem to suggest that people are more likely to state overconfident beliefs when these beliefs are directly elicited, but that people act much closer to the rational Bayesian benchmark when actions only indirectly reveal self-relevant beliefs.

The third essay is joint work with Michael F. Pesko. We estimate the effect of county-level e-cigarette indoor vaping restrictions on adult prenatal smoking and birth outcomes using United States birth record data for 7 million pregnant women living in places already comprehensively banning the indoor use of traditional cigarettes. We use both cross-sectional and panel data to estimate our difference-in-difference models. Our panel model results suggest that adoption of a comprehensive indoor vaping restriction increased prenatal smoking by 2.0 percentage points, which is double the estimate obtained from a cross-sectional model. We also document heterogeneity in effect sizes along lines of age, education, and type of insurance.

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