Monday, January 16, 2006

Smokers, you enjoy tobacco taxes!

Professor Sendhil Mullainathan has worked on a number of interesting behavior economics papers.

  • Tobacco Taxes make likely smokers happier. Using Data from the US and Canada along with excise tax changes in different States, likely smokers are happier with higher taxes.

    I always thought it a bit unfair to target a minority group, usually of lower income, for special taxation when everyone else is unwilling to chip in, but it may be for the best.

  • You are more likely to support a politician because you voted for them. Using data from 19 and 20 year olds, who were either eligible or ineligible to vote in the prior Presidential election, the authors found the people who voted to have more polarized views on politicians, suggesting that people view a politician's behavior to agree with their own prior judgment.

    I suppose this same effect occurs when someone publically supports a politician. They have to keep supporting them because otherwise they must admit they were wrong about the person previously. Does this explain insane arguments by self-proclaimed libertarians that the Bush Administration spying on US citizens illegally is no big deal? Or does it explain why I think Bush is evil, an idiot, or an evil idiot, when in reality he is a lovable manly man, fighting for The American Way? I am going to have to go with the former.

  • People with common black names on resumes get called back for interviews less often than those with common white names.

    But this is hard to square with Levitt and Fryer's conclusion that there is no negative relationship between having a distinctively Black name and later life outcomes after controlling for a child's circumstances at birth.

  • Simple changes in how an offer of credit is presented can significantly change how many people will accept the offer.
    A South African lender of short-term cash loans sent out tens of thousands of offers to prior customers with random changes in interest rates along with changes in the offer letter. Listing one payment plan, rather than three, significantly increased the applications for credit (equal to lowering the interest rate 2.3%). And for men, having a picture of woman on the letter, rather than a man, significantly increased the number of applications (equal to 4% change in the interest rate). A promotional giveaway can actually reduce the number of (attentive) people applying for credit.
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