Becker Friedman Institute
for Research in Economics
The University of Chicago

Research. Insights. Impact. Advancing the Legacy of Chicago Economics.

D12: Consumer Economics: Empirical Analysis

Measuring the Welfare Effects of Residential Energy Efficiency Programs

Hunt Allcott, Michael Greenstone

 This paper sets out a framework to evaluate the welfare impacts of residential energy efficiency programs in the presence of imperfect information, behavioral biases, and externalities, then estimates key parameters using a 100,000-household field experiment. Several results run counter to conventional wisdom: we find no evidence of informational or behavioral failures thought to reduce program participation, there are large unobserved benefits and costs that traditional evaluations miss, and realized energy savings are only 58 percent of predictions.

Measuring the Welfare Effects of Residential Energy Efficiency Programs with Self-Selection into Program Participation

Hunt Allcott, Michael Greenstone

We introduce a framework to evaluate the welfare effects of residential energy efficiency programs and estimate key parameters using a 100,000-household field experiment. Results generally contradict conventional wisdom: there is no evidence of informational or behavioral market failures, efficiency investments entail large non-monetary costs and benefits, and realized energy savings are just 58% of engineering predictions.

The Effect of Unconventional Fiscal Policy on Consumption Expenditure

Francesco D'Acunto, Daniel Hoang, Michael Weber

Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We exploit a unique natural experiment for an empirical test of the effectiveness of unconventional fiscal policy. To comply with European Union law, the German government announced in November 2005 an unexpected 3-percentage-point increase in value-added tax (VAT), effective in 2007. The shock increased households’ inflation expectations during 2006 and actual inflation in 2007.

Inflation Expectations and Consumption Expenditure

Francesco D’Acunto, Daniel Hoang, and Michael Weber

Households that expect an increase in inflation have a 8% higher reported readiness to spend on durables compared to other households. This positive cross-sectional association is stronger for more educated, working-age, high-income, and urban households. We document these novel facts using German micro data for the period 2000-2013. We use a natural experiment for identification. The German government unexpectedly announced in November 2005 a three-percentage-point increase in value-added tax (VAT) effective in 2007.

Intrahousehold Distribution and Child Poverty: Theory and Evidence from Côte d'Ivoire

Olivier Bargain, Olivier Donni, Prudence Kwenda

Poverty measures in developing countries often ignore the distribution of resources within families and the gains from joint consumption. In this paper, we extend the collective model of household consumption to recover mother's, father's and children's shares together with economies of scale, using the observation of adult-specific goods and an extended version of the Rothbarth method.

Money or Ideas? A Field Experiment on Constraints to Entrepreneurship in Rural Pakistan

Ghazala Mansuri, Xavier Giné

This paper identifies the importance of access to human capital and credit for entrepreneurship. We conduct a field experiment in rural Pakistan where a subset of male and female microfinance clients were offered 8 full time days of business training and the opportunity to participate in a lottery to access business loans of up to 100,000 Rs (USD 1,700), about seven times the average loan size. We find that offering business training leads to increased business knowledge, better business practices and improvements in several household and member outcomes.

Selection on Moral Hazard in Health Insurance

Liran Einav, Amy Finkelstein, Stephen P. Ryan, Paul Schrimpf, Mark R. Cullen

In this paper we explore the possibility that individuals may select insurance coverage in part based on their anticipated behavioral response to the insurance contract. Such "selection on moral hazard" can have important implications for attempts to combat either selection or moral hazard. We explore these issues using individual-level panel data from a single firm, which contain information about health insurance options, choices, and subsequent claims.

Consumption Inequality and Intra-household Allocations

Jeremy Lise, Shannon Seitz

The consumption literature uses adult equivalence scales to measure individual-level inequality. This practice imposes the assumption that there is no within-household inequality. In this paper, we show that ignoring consumption inequality within households produces misleading estimates of inequality along two dimensions. To illustrate this point, we use a collective model of household behaviour to estimate consumption inequality in the U.K. from 1968 to 2001.