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Working Paper
Investment decisions and negative interest rates
While the current European Central Bank deposit rate and 2-year German government bond yields are negative, the U.S. 2-year government bond and deposit rates are positive. Insights from Prospect Theory suggest that this situation may lead to an excess flow of funds into the United States. Yet the environment of negative interest rates is different from the environment considered in Prospect Theory and subsequent literature, since decisions are framed in terms of rates of return rather than absolute amounts and the task involves the allocation of funds rather than a choice or a pricing task as ...
Working Paper
Doing good or doing well? Image motivation and monetary incentives in behaving prosocially
This paper examines image motivation?the desire to be liked and well-regarded by others? as a driver in prosocial behavior (doing good), and asks whether extrinsic monetary incentives (doing well) have a detrimental effect on prosocial behavior due to crowding out of image motivation. ; By definition, image depends on one?s behavior being visible to other people. Using this unique property we show that image is indeed an important part of the motivation to behave prosocially. Moreover, we show that extrinsic incentives interact with image motivation and are therefore less effective in public ...
Working Paper
Informal Work and Official Employment Statistics: What’s Missing?
Using eight consecutive waves of the Survey of Informal Work Participation (SIWP) spanning 2015 through 2022, we investigate informal “gig” work participation in the United States— broadly defined to include online and offline activities—and its implications for the measurement of employment. Our results suggest that employment rates among US household heads were consistently understated in the Current Population Survey (CPS). Under conservative estimates, we find that the employment-to-population ratio would have been 0.25 to 1.1 percentage points higher over the 2015–2022 period ...
Working Paper
Who counts as employed?: informal work, employment status, and labor market slack
Several recent studies find that as of 2015, a significant share of working-age adults in the United States participates in nonstandard work arrangements. Such arrangements tend to lack long-term employment contracts and are often referred to as ?gig economy? jobs. This paper investigates the implications of nonstandard or ?informal? work for the measurement of employment status and labor market slack. Using original survey data, we find that as of 2015 roughly 37 percent of nonretired U.S. adults participated in some type of informal work, and roughly 20 percent participated in informal ...
Report
Relative pay, productivity, and labor supply
Relative pay ? earnings compared with the earnings of others doing a similar job, or compared with one?s earnings in the past ? affects how much individuals would like to work (labor supply) and their effort on the job; it therefore has implications for both employers and policy makers. A collection of recent studies shows that relative pay information, even when it is irrelevant, significantly affects labor supply and effort. This effect stems mainly from those who compare unfavorably, as essentially all studies find that awareness of earning less than others or less than in the past ...
Working Paper
Public and private values
This paper experimentally examines whether looking at other people's pricing decisions is a type of heuristic - a decisionmaking rule - that people use even when it is not applicable, as in the case of clearly private value goods. We find evidence that this is indeed the case - an individual's valuation of a purely subjective experience under full information, elicited using an incentive compatible mechanism, is highly influence by valuations made by others. This result can shed light on price behavior, price rigidities, and rents.
Working Paper
Inflation Thresholds and Inattention
Inflation expectations are key to economic activity, and in the current economic climate of a heated labor market, they are central to the policy debate. At the same time, a growing literature on inattention suggests that individuals, and therefore individual behavior, may not be sensitive to changes in inflation when it is low. This paper explores evidence of such inattention by constructing three different measures based on the University of Michigan’s Survey of Consumers 1-year ahead inflation expectations. Exploring inflation thresholds of 2, 3, and 4 percent, our findings are ...
Report
Informal work in the United States: evidence from survey responses
"Informal" work refers to temporary or occasional side jobs from which earnings are presumably not reported in full to the Internal Revenue Service and which typically do not constitute a dominant or complete source of income. Perhaps the most important reason for undertaking informal work is to offset negative income and employment shocks, such as reduced hours in a formal job, stagnant wages, or involuntary unemployment. Such negative shocks affected many Americans during the Great Recession, so it is important to determine the extent to which people engaged in informal work during this ...
Briefing
Asymmetric responses to tax-induced changes in personal income: the 2013 payroll tax hike versus anticipated 2012 tax refunds
As part of the Boston Earned Income Tax Credit Coalition's free tax preparation service offered at the Boston Roxbury Resource Center between January and April 2013, 945 low-to-moderate income individuals were asked about payroll tax changes, financial planning, and their personal characteristics. Using these survey responses, the authors calculated how these individuals planned to respond to the payroll tax hike and their tax refund. The results show that their marginal propensity to consume (MPC) out of the tax refund is 30 percentage points lower than their spending reaction to the tax ...
Report
Wage inflation and informal work
Despite very low unemployment in the United States in recent months, wage inflation has remained modest. This paper investigates the possibility that there is hidden labor market slack in the form of informal or gig economy work, which may help explain this wage growth puzzle. Using unique data from 2015 and 2016 that we collected through the Survey of Informal Work Participation ? part of the Federal Reserve Bank of New York?s Survey of Consumer Expectations ? we find indirect and direct evidence for this hypothesis. First, we find that a measure of informal labor is negatively associated ...