Luck and Effort: Learning about Income from Friends and Neighbors.Current Draft. Can social segregation explain differences in beliefs regarding the role of effort in determining high incomes? I develop a model of lineages of agents learning about the effect of effort on the probability of receiving a high income based on their own experience (effort chosen and income received) and the experiences of agents in their networks. Simulating economies of these agents, only two conditions are needed for the existence of long-run differences in beliefs: (i) agents assume their networks are representative of the whole economy, and (ii) they are more likely to meet others with similar life experiences—as under social segregation. For my analysis, I also consider (iii) imperfect intergenerational transmission of beliefs, in the form of partial confidence about parent’s beliefs, to account for sizable changes in beliefs due to single mobility experiences. I find a positive relationship between the degree of social segregation and the level of long-run differences in beliefs. Moreover, high levels of social segregation can lead agents to make inefficient effort choices while average beliefs drift away from real parameters. High levels of social segregation generate groups of agents who persistently choose to exert (no) effort coexisting with agents choosing depending on their cost of effort. And, mobility experiences resulting from luck decrease the belief about the role of effort. Formerly circulated under the name "Segregation and Beliefs regarding Income Determining Factors." Presented at: (2016) Canadian Economics Association (CEA) Annual Conference, Midwest Political Science Association Conference, (2015) University of Michigan School of Information BEE-ICD Lab Meetings, (2014) Behavioral Models of Politics Conference.
Publications
2017Responsibility or autonomy: children and the probability of self-employment in the USA. Small Business Economics: an Entrepreneurship Journal, 49(2), 493-512 (Available here). This paper studies the effect of children on the likelihood of self-employment. Having children can change preferences that are central to the decision whether to be self-employed. On the one hand, individuals’ preference for autonomy and flexibility increases when having children, which increases the willingness to be self-employed. On the other hand, having children entails a responsibility over someone else, which increases individual risk aversion and decreases the willingness to be self-employed. Using a pooled cross section of 26 years from the General Social Survey, instrumental variable estimates indicate that, in the U.S., having children under the age of 18 in the household decreases the likelihood of being self-employed by 11% (i.e. the responsibility effect dominates). This effect is considerable as a child decreases the probability of self-employment more than the increase associated with being raised by a self-employed father—one of the main determinants of self-employment.
2008 El mercado venezolano en las exportaciones colombianas: Dependencia de los exportadores en 2006. Coyuntura Económica, 38(1), 77–107. With Enrique Montes, Aaron Garavito, Carolina Pulido, and Mónica Hernández. Available at: RePEc:col000438:012786
Working Papers
2016 Opportunities and Effort: ex-post redistribution in the lab.Current Draft. This paper presents evidence from a lab experiment examining the effect of information regarding effort and opportunities in ex-post redistribution behavior. In the experiment, individuals are randomly selected into one of two groups, each endowed with different probabilities of earning $20. By exerting effort individuals can increase their probability of earning the $20, but conditional on effort the difference in probabilities remain constant. That is, different groups bestows individuals with different opportunities. After initial earnings are determined, I examine redistribution decisions using a dictator game where the dictator has $20 and the receiver $0. Treatments vary (i) the level of inequality of opportunities and (ii) information regarding receivers’ effort and opportunities. I find dictators consistently revealing a lower concern for low effort receivers. However, dictators do not significantly consider opportunities—either the receivers’ or their own—when redistributing. - Previously circulated as (2014) Information Effect Regarding Inequality of Opportunities on Redistribution : A Lab Experiment (Working Paper No. 2014-75). University of Calgary. Presented at: (2014) North-American Economics Science Association Meetings, the Antigua Experimental Economics Conference, the Canadian Economics Association (CEA) Annual Conference, and Science of Philanthropy Initiative Annual Conference (Poster session) (2013) North-American ESA Meetings.
2010 Risk Preferences Under Extreme Poverty : A Field Experiment (Documento CEDE No. 2010-33). Bogotá, Colombia: Universidad de los Andes–Facultad de Economía–Cede. Available at : RePEc:col:000089:007717 This paper studies the effects of subsistence and survival constraints in risk behavior. It posits a theory of rational decision making that explains the seemingly contradictory empirical findings of the poor being extremely risk averse in some cases while being extremely risk loving in other cases. According to this theory, revealed risk preferences respond to the effect of subsistence constraints in life expectancy and the possibility (or not) of assuring one's subsistence with a low risk activity. As a way of testing this theory, 92 individuals from households living in poverty and extreme poverty were presented with a high-stakes risk choice involving only gains. This resulted in an economic quasi-experiment, inasmuch as the treatment, deciding around subsistence, was not randomly assigned but instead was determined based on households' per-capita incomes. I use a regression discontinuity design, and find evidence suggesting that, being presented with the opportunity of avoiding undernourishment significantly decreases a household's risk aversion.
Work in Progress
Workers stick together? Performance pay inequality, redistribution and the determinants of income. With Robert Oxoby (University of Calgary). Slides Presented at: (2016) North American ESA.
Edited Encyclopedia Entries
2015 "James Duesenberry" and "Relative Income Effects". In (M. Altman, Ed.) Real-World Decision Making An Encyclopedia of Behavioral Economics. Greenwood. With Robert Oxoby.