Three essays on applied microeconomics: Consumer and employee behavior

Overview

Abstract (English)

This dissertation consists of three chapters, each of which can be considered an independent essay. The three essays contribute to labor economics, sports economics, and behavioral economics. The first chapter, entitled “Peer Enforcement in Teams: Evidence from High-Skill Professional Workers with Repeated Interactions” (joint with Brad Humphreys), focuses on pay and performance in a team environment. Working in teams increases productivity but also generates incentives to shirk. Recent work by Che and Yoo (2001, American Economic Review) suggests that peer enforcement, coupled with financial incentives in a setting of repeated interactions, can play a role in deterring shirking in teams. We analyze performance and compensation data for NFL offensive linemen over the ten-year period from 2000 to 2009. Offensive linemen can be considered a high-skill, high-salary, repeatedly interacting team. We find evidence that teammates’ effort signals (yards per sack allowed) reduce the salaries of individual offensive linemen, providing a low-powered sanctioning mechanism for individual workers. In other words, the deterrence mechanism affects teammates more than the worker who seeks to deter shirking. Moreover, a separate, independently monitored individual effort signal (yards per penalty) also reduces salaries. The second chapter of my dissertation is “Consumption Commitments and Simultaneous Insuring and Gambling: Evidence from Canada.” In this paper, I extend the recent theoretical contribution by Chetty and Szeidl (2007, The Quarterly Journal of Economics) to a classic research question in behavioral economics: why do some individuals simultaneously buy insurance and gamble? This behavior is “contradictory” to von Neumann-Morgenstern expected utility theory because insurance purchase indicates risk aversion while gambling indicates risk loving. Chetty and Szeidl (2007) propose a novel explanation based on consumption commitments. These commitments magnify risk aversion and thus induce Friedman-Savage local non-concavity in the utility function. I extend this line of research theoretically and empirically. Theoretically, the paper shows that commitments increase risk loving over gambles with large uncertain payoffs but for gambles with moderate-to-large uncertain payoffs, moderate commitments amplify risk loving, while large commitments mitigate risk loving. Empirically, patterns in household 2decisions to participate in government-run lotteries, small prize gambles (including casino gambling, slot machines, and video lottery terminals), and to purchase life insurance support these predictions. The third chapter, “The Relationship Between Consumer Spending on Exercise, Sports Betting and Attending Sporting Events” (with Brad Humphreys and Jane Ruseski), also uses data from the SHS. Utilizing a large sample of more than 145,000 households, we investigate the relationship between consumer spending on three alternative leisure time activities: sports betting, exercise, and attending live sporting events. The analysis of these categories of consumer spending was motivated by recent proposed changes in legal sports betting in the U.S. and Canada, and claims about attending games and participation in physical activity responding to those changes. We estimate the relationship between consumer spending on these activities. Our results suggest that betting and game attendance are complements, while betting and exercise, and attendance and exercise, are substitutes.

Abstract (French)

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