Public Institutions in a Developing Country: Do Behavioral ...ctrpfp.ac.in/S_Chatterjee19.pdf ·...
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Do Behavioral Biases Affect Perceptions About Efficacy? Somdeep Chatterjee IIM Lucknow Introduction Background Literature Conceptual Framework Estimation Data Identification Results Conclusions Public Institutions in a Developing Country: Do Behavioral Biases Affect Perceptions About Efficacy? Somdeep Chatterjee Indian Institute of Management Lucknow International Conference on Public Finance and Public Policy, January 2019 CTRPFP - Kolkata
Transcript of Public Institutions in a Developing Country: Do Behavioral ...ctrpfp.ac.in/S_Chatterjee19.pdf ·...
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Public Institutions in a Developing Country:Do Behavioral Biases Affect Perceptions
About Efficacy?
Somdeep ChatterjeeIndian Institute of Management Lucknow
International Conference on Public Financeand Public Policy, January 2019
CTRPFP - Kolkata
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Playing Devil’s Advocate?
Source: The New Yorker (Nov 20, 1978)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Playing Devil’s Advocate?
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Introduction
• The efficient functioning of public institutions is essentialfor the growth and development of an economy.
• One major criticism: lack of performance in developingeconomies.
• Delivery of basic public services depends heavily oninstitutions such as these
• Any inefficiency in them can lead to negative consequences
• A less obvious fact: importance of people havingconfidence in these institutions (Clausen, Kraay and Nyiri2011; Newton and Norris 2000)
• If people do not have confidence in law makinginstitutions, then they are less likely to report crimes.
• Corbacho, Philipp and Ruiz-Vega (2015) present anexample from Latin America to suggest that effectivenessof crime prevention depends on rebuilding confidence inpublic institutions.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Introduction
• The efficient functioning of public institutions is essentialfor the growth and development of an economy.
• One major criticism: lack of performance in developingeconomies.
• Delivery of basic public services depends heavily oninstitutions such as these
• Any inefficiency in them can lead to negative consequences
• A less obvious fact: importance of people havingconfidence in these institutions (Clausen, Kraay and Nyiri2011; Newton and Norris 2000)
• If people do not have confidence in law makinginstitutions, then they are less likely to report crimes.
• Corbacho, Philipp and Ruiz-Vega (2015) present anexample from Latin America to suggest that effectivenessof crime prevention depends on rebuilding confidence inpublic institutions.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Introduction
• The efficient functioning of public institutions is essentialfor the growth and development of an economy.
• One major criticism: lack of performance in developingeconomies.
• Delivery of basic public services depends heavily oninstitutions such as these
• Any inefficiency in them can lead to negative consequences
• A less obvious fact: importance of people havingconfidence in these institutions (Clausen, Kraay and Nyiri2011; Newton and Norris 2000)
• If people do not have confidence in law makinginstitutions, then they are less likely to report crimes.
• Corbacho, Philipp and Ruiz-Vega (2015) present anexample from Latin America to suggest that effectivenessof crime prevention depends on rebuilding confidence inpublic institutions.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
What explains lack of confidencein public institutions?
• Actual poor performances, corruption, general economicconditions etc.
• This paper: Idiosyncratic biases?
• Behavioral motivation for such lack of confidence (eg:indebtedness or economic distress)
• Take advantage of exogenous sources of indebtedness in aninstrumental variables framework to establish presence ofsuch a bias
• Findings:
• Using Indian data, I show that personal economichardships affects confidence in public institutions.
• I find that a marginal increase in indebtedness can lead toupto 4% erosion in confidence in public institutions.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
What explains lack of confidencein public institutions?
• Actual poor performances, corruption, general economicconditions etc.
• This paper: Idiosyncratic biases?
• Behavioral motivation for such lack of confidence (eg:indebtedness or economic distress)
• Take advantage of exogenous sources of indebtedness in aninstrumental variables framework to establish presence ofsuch a bias
• Findings:
• Using Indian data, I show that personal economichardships affects confidence in public institutions.
• I find that a marginal increase in indebtedness can lead toupto 4% erosion in confidence in public institutions.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
What explains lack of confidencein public institutions?
• Actual poor performances, corruption, general economicconditions etc.
• This paper: Idiosyncratic biases?
• Behavioral motivation for such lack of confidence (eg:indebtedness or economic distress)
• Take advantage of exogenous sources of indebtedness in aninstrumental variables framework to establish presence ofsuch a bias
• Findings:
• Using Indian data, I show that personal economichardships affects confidence in public institutions.
• I find that a marginal increase in indebtedness can lead toupto 4% erosion in confidence in public institutions.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
How Confidence is measured?
• Most objective measures of confidence are self-reported.• It is implausible to think of a way to gauge the actual
confidence levels of individuals without them explicitlybeing asked about it.
• Researchers and policymakers therefore must rely on theseself-reported measures.
• Concern: possibility of bias in the self-reports.
• Hypothesis: self-reported confidence measures may beinfluenced by associated problems that the responder isgoing through.
• Motivating example: interpretation of economic crisesare different among people personally affected by it (Leiser, Benita and Bourgeois-Gironde 2016)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
How Confidence is measured?
• Most objective measures of confidence are self-reported.• It is implausible to think of a way to gauge the actual
confidence levels of individuals without them explicitlybeing asked about it.
• Researchers and policymakers therefore must rely on theseself-reported measures.
• Concern: possibility of bias in the self-reports.
• Hypothesis: self-reported confidence measures may beinfluenced by associated problems that the responder isgoing through.
• Motivating example: interpretation of economic crisesare different among people personally affected by it (Leiser, Benita and Bourgeois-Gironde 2016)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
How Confidence is measured?
• Most objective measures of confidence are self-reported.• It is implausible to think of a way to gauge the actual
confidence levels of individuals without them explicitlybeing asked about it.
• Researchers and policymakers therefore must rely on theseself-reported measures.
• Concern: possibility of bias in the self-reports.
• Hypothesis: self-reported confidence measures may beinfluenced by associated problems that the responder isgoing through.
• Motivating example: interpretation of economic crisesare different among people personally affected by it (Leiser, Benita and Bourgeois-Gironde 2016)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
How Confidence is measured?
• Most objective measures of confidence are self-reported.• It is implausible to think of a way to gauge the actual
confidence levels of individuals without them explicitlybeing asked about it.
• Researchers and policymakers therefore must rely on theseself-reported measures.
• Concern: possibility of bias in the self-reports.
• Hypothesis: self-reported confidence measures may beinfluenced by associated problems that the responder isgoing through.
• Motivating example: interpretation of economic crisesare different among people personally affected by it (Leiser, Benita and Bourgeois-Gironde 2016)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
How Confidence is measured?
• Most objective measures of confidence are self-reported.• It is implausible to think of a way to gauge the actual
confidence levels of individuals without them explicitlybeing asked about it.
• Researchers and policymakers therefore must rely on theseself-reported measures.
• Concern: possibility of bias in the self-reports.
• Hypothesis: self-reported confidence measures may beinfluenced by associated problems that the responder isgoing through.
• Motivating example: interpretation of economic crisesare different among people personally affected by it (Leiser, Benita and Bourgeois-Gironde 2016)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Why confidence matters?
• Recent evidence acknowledging the importance ofconfidence and trust to ensure that economic growth haswelfare consequences:
• Mikucka, Sarracino and Dubrow (2017): point out theimportance of social trust in making economic growthcompatible with subjective well being.
• Standard agency relation arguments (Barro 1973; Ferejohn1986)
• Consider citizens are principals electing politicalrepresentatives (agents) to run and control publicinstitutions.
• Best interest of the agent who seeks to get re-elected is toalign his actions to the principal.
• Any signal from the principal likely to affect the agent’schoice.
• Biased signal: agency relation breaks down/ inefficientchoices.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Why confidence matters?
• Recent evidence acknowledging the importance ofconfidence and trust to ensure that economic growth haswelfare consequences:
• Mikucka, Sarracino and Dubrow (2017): point out theimportance of social trust in making economic growthcompatible with subjective well being.
• Standard agency relation arguments (Barro 1973; Ferejohn1986)
• Consider citizens are principals electing politicalrepresentatives (agents) to run and control publicinstitutions.
• Best interest of the agent who seeks to get re-elected is toalign his actions to the principal.
• Any signal from the principal likely to affect the agent’schoice.
• Biased signal: agency relation breaks down/ inefficientchoices.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Related Literature• Political Science Literature
• public institutions less effective when prevailing lack ofconfidence (Caldeira and Gibson 1995; Gibson, Caldeiraand Spence 2003; Mishler and Rose 2005).
• role of local economic conditions on voting behavior andconfidence in public institutions (Lewis-Beck andStegmaier 2000; Reeves and Gimpel 2012; Owens andCook 2013)
• Sociology Literature structural determinants of trust andconfidence (Slomczynski and Janicka 2009).
• Economics Literature• Role of public institutions in economic development
(Acemoglu, Johnson and Robinson 2001; Rodrik,Subramanian and Trebbi 2004)
• Determinants of confidence (Clausen, Kraay and Nyiri2011)
• Behavioral implications of trust (Brown et al 2015;Fungacova, Hasan and Weill 2017).
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Related Literature• Political Science Literature
• public institutions less effective when prevailing lack ofconfidence (Caldeira and Gibson 1995; Gibson, Caldeiraand Spence 2003; Mishler and Rose 2005).
• role of local economic conditions on voting behavior andconfidence in public institutions (Lewis-Beck andStegmaier 2000; Reeves and Gimpel 2012; Owens andCook 2013)
• Sociology Literature structural determinants of trust andconfidence (Slomczynski and Janicka 2009).
• Economics Literature• Role of public institutions in economic development
(Acemoglu, Johnson and Robinson 2001; Rodrik,Subramanian and Trebbi 2004)
• Determinants of confidence (Clausen, Kraay and Nyiri2011)
• Behavioral implications of trust (Brown et al 2015;Fungacova, Hasan and Weill 2017).
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Related Literature• Political Science Literature
• public institutions less effective when prevailing lack ofconfidence (Caldeira and Gibson 1995; Gibson, Caldeiraand Spence 2003; Mishler and Rose 2005).
• role of local economic conditions on voting behavior andconfidence in public institutions (Lewis-Beck andStegmaier 2000; Reeves and Gimpel 2012; Owens andCook 2013)
• Sociology Literature structural determinants of trust andconfidence (Slomczynski and Janicka 2009).
• Economics Literature• Role of public institutions in economic development
(Acemoglu, Johnson and Robinson 2001; Rodrik,Subramanian and Trebbi 2004)
• Determinants of confidence (Clausen, Kraay and Nyiri2011)
• Behavioral implications of trust (Brown et al 2015;Fungacova, Hasan and Weill 2017).
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Contribution
• While some studies show that people with low education,that are unemployed, that are on long-term sick-leave andthat belong to the manual working class have lowerconfidence in public institutions than people that liveunder better or more privileged circumstances (Uslaner2018, Zmerli and. Van der Meer 2017)
• Mostly macro-picture, very few micro-studies
• Other papers attribute variations in confidence to thepro-cyclical nature of trust and relate it to business cycles(Stevenson and Wolfers 2011)
• To my knowledge, the link between individual economicdistress and trust in public institutions has not beenstudied empirically (household survey data, Indian data).
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Contribution
• While some studies show that people with low education,that are unemployed, that are on long-term sick-leave andthat belong to the manual working class have lowerconfidence in public institutions than people that liveunder better or more privileged circumstances (Uslaner2018, Zmerli and. Van der Meer 2017)
• Mostly macro-picture, very few micro-studies
• Other papers attribute variations in confidence to thepro-cyclical nature of trust and relate it to business cycles(Stevenson and Wolfers 2011)
• To my knowledge, the link between individual economicdistress and trust in public institutions has not beenstudied empirically (household survey data, Indian data).
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Contribution
• While some studies show that people with low education,that are unemployed, that are on long-term sick-leave andthat belong to the manual working class have lowerconfidence in public institutions than people that liveunder better or more privileged circumstances (Uslaner2018, Zmerli and. Van der Meer 2017)
• Mostly macro-picture, very few micro-studies
• Other papers attribute variations in confidence to thepro-cyclical nature of trust and relate it to business cycles(Stevenson and Wolfers 2011)
• To my knowledge, the link between individual economicdistress and trust in public institutions has not beenstudied empirically (household survey data, Indian data).
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Contribution
• While some studies show that people with low education,that are unemployed, that are on long-term sick-leave andthat belong to the manual working class have lowerconfidence in public institutions than people that liveunder better or more privileged circumstances (Uslaner2018, Zmerli and. Van der Meer 2017)
• Mostly macro-picture, very few micro-studies
• Other papers attribute variations in confidence to thepro-cyclical nature of trust and relate it to business cycles(Stevenson and Wolfers 2011)
• To my knowledge, the link between individual economicdistress and trust in public institutions has not beenstudied empirically (household survey data, Indian data).
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Conceptual Framework
• Why does a personal problem like indebtedness affect theindividual’s confidence in public institutions?
• Apparently irrational, but possible to justify usingbehavioral motivations such as anchoring (Tversky andKahnemann 1974).
• Decision making under ambiguous situations• Anchoring theory suggests that people start with an easily
available guess and then adjust up or downwards from thatguess
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Conceptual Framework
• Why does a personal problem like indebtedness affect theindividual’s confidence in public institutions?
• Apparently irrational, but possible to justify usingbehavioral motivations such as anchoring (Tversky andKahnemann 1974).
• Decision making under ambiguous situations• Anchoring theory suggests that people start with an easily
available guess and then adjust up or downwards from thatguess
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Conceptual Framework
• Why does a personal problem like indebtedness affect theindividual’s confidence in public institutions?
• Apparently irrational, but possible to justify usingbehavioral motivations such as anchoring (Tversky andKahnemann 1974).
• Decision making under ambiguous situations
• Anchoring theory suggests that people start with an easilyavailable guess and then adjust up or downwards from thatguess
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Conceptual Framework
• Why does a personal problem like indebtedness affect theindividual’s confidence in public institutions?
• Apparently irrational, but possible to justify usingbehavioral motivations such as anchoring (Tversky andKahnemann 1974).
• Decision making under ambiguous situations• Anchoring theory suggests that people start with an easily
available guess and then adjust up or downwards from thatguess
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Anchoring Heuristic
• The idea of Anchoring leads to two related possibilities:
• Arbitrary Coherence: coherent relative preferences butarbitrary absolute preferences (Ariely, Loewenstein andPrelec 2003)
• Focussing Illusion: too much emphasis on a particularaspect of life (Schkade and Kahnemann 1998)
• leads to innacurate and inefficient choices which decreasesutility
• Kahnemann et al. (2006) provide evidence of a focussingillusion suggesting that individuals “...exxagerate thecontribution of their income to happiness”.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Anchoring Heuristic
• The idea of Anchoring leads to two related possibilities:
• Arbitrary Coherence: coherent relative preferences butarbitrary absolute preferences (Ariely, Loewenstein andPrelec 2003)
• Focussing Illusion: too much emphasis on a particularaspect of life (Schkade and Kahnemann 1998)
• leads to innacurate and inefficient choices which decreasesutility
• Kahnemann et al. (2006) provide evidence of a focussingillusion suggesting that individuals “...exxagerate thecontribution of their income to happiness”.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• India Human Development Survey (IHDS) - 2 database of2011-12 (NCAER and the University of Maryland).
• The survey covers 42,152 households from 1503 villagesand 971 urban neighborhoods of India.
• Wide range of information including demographics,educational status, consumption, income, occupation etc.
• The IHDS-2 includes variables for self-reported confidencein public institutions.
• The relevant variables for this paper are:
• Confidence in State Government to Look after People• Confidence in Panchayats to implement public projects• Confidence in government hospitals and doctors to provide
good treatment• Confidence in Courts to deliver justice.• other public institutions like military have limited
interaction with individuals’ daily lives and is thereforeexcluded from the analysis
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• India Human Development Survey (IHDS) - 2 database of2011-12 (NCAER and the University of Maryland).
• The survey covers 42,152 households from 1503 villagesand 971 urban neighborhoods of India.
• Wide range of information including demographics,educational status, consumption, income, occupation etc.
• The IHDS-2 includes variables for self-reported confidencein public institutions.
• The relevant variables for this paper are:
• Confidence in State Government to Look after People• Confidence in Panchayats to implement public projects• Confidence in government hospitals and doctors to provide
good treatment• Confidence in Courts to deliver justice.• other public institutions like military have limited
interaction with individuals’ daily lives and is thereforeexcluded from the analysis
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• India Human Development Survey (IHDS) - 2 database of2011-12 (NCAER and the University of Maryland).
• The survey covers 42,152 households from 1503 villagesand 971 urban neighborhoods of India.
• Wide range of information including demographics,educational status, consumption, income, occupation etc.
• The IHDS-2 includes variables for self-reported confidencein public institutions.
• The relevant variables for this paper are:
• Confidence in State Government to Look after People• Confidence in Panchayats to implement public projects• Confidence in government hospitals and doctors to provide
good treatment• Confidence in Courts to deliver justice.• other public institutions like military have limited
interaction with individuals’ daily lives and is thereforeexcluded from the analysis
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• India Human Development Survey (IHDS) - 2 database of2011-12 (NCAER and the University of Maryland).
• The survey covers 42,152 households from 1503 villagesand 971 urban neighborhoods of India.
• Wide range of information including demographics,educational status, consumption, income, occupation etc.
• The IHDS-2 includes variables for self-reported confidencein public institutions.
• The relevant variables for this paper are:
• Confidence in State Government to Look after People• Confidence in Panchayats to implement public projects• Confidence in government hospitals and doctors to provide
good treatment• Confidence in Courts to deliver justice.
• other public institutions like military have limitedinteraction with individuals’ daily lives and is thereforeexcluded from the analysis
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• India Human Development Survey (IHDS) - 2 database of2011-12 (NCAER and the University of Maryland).
• The survey covers 42,152 households from 1503 villagesand 971 urban neighborhoods of India.
• Wide range of information including demographics,educational status, consumption, income, occupation etc.
• The IHDS-2 includes variables for self-reported confidencein public institutions.
• The relevant variables for this paper are:
• Confidence in State Government to Look after People• Confidence in Panchayats to implement public projects• Confidence in government hospitals and doctors to provide
good treatment• Confidence in Courts to deliver justice.• other public institutions like military have limited
interaction with individuals’ daily lives and is thereforeexcluded from the analysis
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• These are discrete variables with only three possibleanswers; a great deal of confidence, or only someconfidence or hardly any confidence at all.
• I use these discrete variables in a form such that they takevalues 0-2 where 0 signifies no confidence and 2 representsa great deal of confidence.
• These are the outcome variables that I use for myregressions discussed later.
• The main independent variable of interest to us is somemeasure of debt.
• I use the total outstanding debt for individuals at anygiven point in time as a measure of indebtedness.
• The survey also included questions on whether thehousehold suffered any major financial losses due todrought, flood or fire in the previous few years (useful forconstructing IV)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• These are discrete variables with only three possibleanswers; a great deal of confidence, or only someconfidence or hardly any confidence at all.
• I use these discrete variables in a form such that they takevalues 0-2 where 0 signifies no confidence and 2 representsa great deal of confidence.
• These are the outcome variables that I use for myregressions discussed later.
• The main independent variable of interest to us is somemeasure of debt.
• I use the total outstanding debt for individuals at anygiven point in time as a measure of indebtedness.
• The survey also included questions on whether thehousehold suffered any major financial losses due todrought, flood or fire in the previous few years (useful forconstructing IV)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• These are discrete variables with only three possibleanswers; a great deal of confidence, or only someconfidence or hardly any confidence at all.
• I use these discrete variables in a form such that they takevalues 0-2 where 0 signifies no confidence and 2 representsa great deal of confidence.
• These are the outcome variables that I use for myregressions discussed later.
• The main independent variable of interest to us is somemeasure of debt.
• I use the total outstanding debt for individuals at anygiven point in time as a measure of indebtedness.
• The survey also included questions on whether thehousehold suffered any major financial losses due todrought, flood or fire in the previous few years (useful forconstructing IV)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• These are discrete variables with only three possibleanswers; a great deal of confidence, or only someconfidence or hardly any confidence at all.
• I use these discrete variables in a form such that they takevalues 0-2 where 0 signifies no confidence and 2 representsa great deal of confidence.
• These are the outcome variables that I use for myregressions discussed later.
• The main independent variable of interest to us is somemeasure of debt.
• I use the total outstanding debt for individuals at anygiven point in time as a measure of indebtedness.
• The survey also included questions on whether thehousehold suffered any major financial losses due todrought, flood or fire in the previous few years (useful forconstructing IV)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Data
• These are discrete variables with only three possibleanswers; a great deal of confidence, or only someconfidence or hardly any confidence at all.
• I use these discrete variables in a form such that they takevalues 0-2 where 0 signifies no confidence and 2 representsa great deal of confidence.
• These are the outcome variables that I use for myregressions discussed later.
• The main independent variable of interest to us is somemeasure of debt.
• I use the total outstanding debt for individuals at anygiven point in time as a measure of indebtedness.
• The survey also included questions on whether thehousehold suffered any major financial losses due todrought, flood or fire in the previous few years (useful forconstructing IV)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Econometric SpecificationIdeally interested in the following specification for a householdh:
Yh = αv + β · Debth + γ · Xh + εh (1)
where:
• Outcome Y : measure of confidence in various publicinstitutions
• αv represents village or region fixed effects• Debt is captured by log of total outstanding loans.• Estimated β: impact of debt on confidence in public
institutions.• X includes controls for household characteristics like
highest adult education level, total number of members inthe household, number of children in the household,number of married members and number of elderlies, forboth genders, per-capita consumption expenditure and ageof male and female household heads.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Endogeneity Concerns
• Debt is likely to be endogenous
• Selection: ones with low or high confidence in publicinstitutions are the ones who take a loan
• Omitted variables?• Issues of measurement? I use outstanding debt, likely to
be measured with error!
• It is also possible that the super-rich have a lot ofoutstanding debt!
• Propose a 2SLS framework using instrument for debt.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Endogeneity Concerns
• Debt is likely to be endogenous
• Selection: ones with low or high confidence in publicinstitutions are the ones who take a loan
• Omitted variables?• Issues of measurement? I use outstanding debt, likely to
be measured with error!
• It is also possible that the super-rich have a lot ofoutstanding debt!
• Propose a 2SLS framework using instrument for debt.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Instrument for Debt
• In the ideal empirical experiment, individuals would berandomly assigned to indebted and non-indebted groups.
• Compare confidence measures for those indebted and thosenot, get causal estimate of the impact of having debt onoutcome.
• Such an experiment not only infeasible, also perhapsunethical!
• So must rely on observational data
• Use a measure of large monetary losses occurring fromnatural disasters like drought, flood, fire as an instrumentfor debt outstanding
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Instrument for Debt
• In the ideal empirical experiment, individuals would berandomly assigned to indebted and non-indebted groups.
• Compare confidence measures for those indebted and thosenot, get causal estimate of the impact of having debt onoutcome.
• Such an experiment not only infeasible, also perhapsunethical!
• So must rely on observational data
• Use a measure of large monetary losses occurring fromnatural disasters like drought, flood, fire as an instrumentfor debt outstanding
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Relevance and Validity
• Instrument Relevance
• Natural disasters bring about a huge financial loss:households are highly likely to borrow money in order tofinance their recovery
• Well functioning formal insurance markets non-existent(Munshi and Rosenzweig 2016)
• Instrument Validity
• Required: the magnitude of the natural disaster(measured in monetary units) should only affect confidencein public institutions through the channel of loanoutstanding
• Difficult to validate using data• Conservative Approach: Look at Reduced Form effects
(and 2SLS separately)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Relevance and Validity
• Instrument Relevance
• Natural disasters bring about a huge financial loss:households are highly likely to borrow money in order tofinance their recovery
• Well functioning formal insurance markets non-existent(Munshi and Rosenzweig 2016)
• Instrument Validity
• Required: the magnitude of the natural disaster(measured in monetary units) should only affect confidencein public institutions through the channel of loanoutstanding
• Difficult to validate using data• Conservative Approach: Look at Reduced Form effects
(and 2SLS separately)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Relevance and Validity
• Instrument Relevance
• Natural disasters bring about a huge financial loss:households are highly likely to borrow money in order tofinance their recovery
• Well functioning formal insurance markets non-existent(Munshi and Rosenzweig 2016)
• Instrument Validity
• Required: the magnitude of the natural disaster(measured in monetary units) should only affect confidencein public institutions through the channel of loanoutstanding
• Difficult to validate using data• Conservative Approach: Look at Reduced Form effects
(and 2SLS separately)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Baseline Regressions
Courts Panchayats State Govt Govt Hospitals
OutstandingLoans -0.0007 -0.0010 -0.0019** -0.0018(0.0007) (0.0008) (0.0008) (0.0008)
R2 0.31 0.25 0.26 0.28
Observations 31424 31481 31435 31525
Notes: The sample is households in the IHDS-II dataset (2011-12). All columns report results from differentregressions. The dependent variable is confidence in public institutions ranging from 0-2, where 0 representsno confidence and 2 represents a great deal of confidence. Independent variable of interest is log ofoutstanding loans. Each column reports regression estimates for different public institutions as per thecolumn head. All regressions include village fixed effects. Additional controls included are family size andeducation of household head, both female and male. Controls for other household composition characteristicslike number of married males and females, number of children of both genders, number of elders of bothgenders are included to control for household specific confounders. Age of the household head andconsumption expenditure per capita are also included as control variables. The observations vary due to thefact that several households in the sample did not respond to all of the questions. Robust standard errorsreported in parentheses. *** p<0.01 **p<0.05 *p<0.1
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Reduced Form
Courts Panchayats State Govt Govt Hospitals
NaturalDisaster -0.0567*** -0.0233 -0.0288* -0.0374**(0.0162) (0.0175)# (0.0178) (0.0171)
R2 0.31 0.25 0.26 0.28
Observations 31398 31454 31408 31498
Notes: The sample is households in the IHDS-II dataset (2011-12). All columns report results from differentregressions. The dependent variable is confidence in public institutions ranging from 0-2, where 0 representsno confidence and 2 represents a great deal of confidence. Independent variable of interest is the dummyvariable for natural calamity, taking the value 1 if household has recently suffered losses due to flood, fire ordroughts and zero otherwise. Each column reports regression estimates for different public institutions as perthe column head. All regressions include village fixed effects. Additional controls included are family size andeducation of household head, both female and male. Controls for other household composition characteristicslike number of married males and females, number of children of both genders, number of elders of bothgenders are included to control for household specific confounders. Age of the household head andconsumption expenditure per capita are also included as control variables. The observations vary due to thefact that several households in the sample did not respond to all of the questions. Robust standard errorsreported in parentheses. *** p<0.01 **p<0.05 *p<0.1 . # indicates that even though the coefficient is notsignifcant at conventional levels, it still has a p-value which is relatively low and the null hypothesis can berejected at the 80% level of confidence.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
2SLS
Courts Panchayats State Govt Govt Hospitals
Indebtedness -0.0690*** -0.0284 -0.0351* -0.0456**(0.0197) (0.0213)# (0.0216) (0.0208)
R2 0.31 0.25 0.26 0.28Observations 31398 31454 31408 314981st Stage F-stat —————42.88—————Mean of Dep Var 1.59 1.09 1.09 1.43
Notes: The sample is households in the IHDS-II dataset (2011-12). All columns report results from differentregressions. The dependent variable is confidence in public institutions ranging from 0-2, where 0 representsno confidence and 2 represents a great deal of confidence. Independent variable of interest is theindebtedness (measured by log outstanding loans) instrumented by the dummy variable for loss occuring dueto a natural calamity as used in Table 19. Each column reports regression estimates for different publicinstitutions as per the column head. All regressions include village fixed effects. Additional controls includedare family size and education of household head, both female and male. Controls for other householdcomposition characteristics like number of married males and females, number of children of both genders,number of elders of both genders are included to control for household specific confounders. Age of thehousehold head and consumption expenditure per capita are also included as control variables. Theobservations vary due to the fact that several households in the sample did not respond to all of thequestions. Robust standard errors reported in parentheses. *** p<0.01 **p<0.05 *p<0.1
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Summary so far
• Overall negative impact of indebtedness on confidence inpublic institutions
• 2SLS estimates suggest effects range roughly from 2.6%for Panchayats to 4.4% for Courts
• If concerns about exclusion restriction; can focus only onreduced form findings: very similar results
• Instrument being used is a pure exogenous shock, soreduced form estimates are unlikely to be biased.
• In theory, an idiosyncratic feature like high outstandingdebt should not affect confidence in public institutions
• Suggestive evidence of some behavioral bias• Self reported confidence ratings are not absolute but
perhaps susceptible to arbitrary coherence based on adifferent cue
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Summary so far
• Overall negative impact of indebtedness on confidence inpublic institutions
• 2SLS estimates suggest effects range roughly from 2.6%for Panchayats to 4.4% for Courts
• If concerns about exclusion restriction; can focus only onreduced form findings: very similar results
• Instrument being used is a pure exogenous shock, soreduced form estimates are unlikely to be biased.
• In theory, an idiosyncratic feature like high outstandingdebt should not affect confidence in public institutions
• Suggestive evidence of some behavioral bias• Self reported confidence ratings are not absolute but
perhaps susceptible to arbitrary coherence based on adifferent cue
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Measuring the Bias
• Can we actually measure the magnitude of this bias?
• Back of the envelope calculations to estimate how muchthe bias contributes to the confidence ratings?
• Difficult to estimate the elasticity with respect to the bias.
• Actual bias is unobserved (first best)• However for policy making purposes, there is a close
second best which one might attempt to investigate:Anchoring Index
• Jacowitz and Kahnemann (1995) introduced the measure(widely used in experimental studies)
• Attempt to apply the measure using a non-experimentalsetup (another contribution to the literature)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Measuring the Bias
• Can we actually measure the magnitude of this bias?
• Back of the envelope calculations to estimate how muchthe bias contributes to the confidence ratings?
• Difficult to estimate the elasticity with respect to the bias.
• Actual bias is unobserved (first best)• However for policy making purposes, there is a close
second best which one might attempt to investigate:Anchoring Index
• Jacowitz and Kahnemann (1995) introduced the measure(widely used in experimental studies)
• Attempt to apply the measure using a non-experimentalsetup (another contribution to the literature)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Measuring the Bias
• Can we actually measure the magnitude of this bias?
• Back of the envelope calculations to estimate how muchthe bias contributes to the confidence ratings?
• Difficult to estimate the elasticity with respect to the bias.
• Actual bias is unobserved (first best)• However for policy making purposes, there is a close
second best which one might attempt to investigate:Anchoring Index
• Jacowitz and Kahnemann (1995) introduced the measure(widely used in experimental studies)
• Attempt to apply the measure using a non-experimentalsetup (another contribution to the literature)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Anchoring Index
• In experiments, anchor is experimentally imposed (eg:rolling a die before a decision; spinnign wheel of fortunebefore answering a question etc)
• In this paper, consider a self-generated anchor
• Lieder et al (2017) explore the possibility of self generatedanchors but again in an experimental setup
• Novel idea of this paper: measure anchoring bias from apotential self-generated (or nature generated) anchor usingactual household survey data (not part of an experiment)
• Anchoring index: ratio of two differences (numeratorwould be the difference in the actual guesses made by anindividual when exposed to the different anchors and thedenominator would be the actual measured difference inthe values of the anchors)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Anchoring Index
• In experiments, anchor is experimentally imposed (eg:rolling a die before a decision; spinnign wheel of fortunebefore answering a question etc)
• In this paper, consider a self-generated anchor
• Lieder et al (2017) explore the possibility of self generatedanchors but again in an experimental setup
• Novel idea of this paper: measure anchoring bias from apotential self-generated (or nature generated) anchor usingactual household survey data (not part of an experiment)
• Anchoring index: ratio of two differences (numeratorwould be the difference in the actual guesses made by anindividual when exposed to the different anchors and thedenominator would be the actual measured difference inthe values of the anchors)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Anchoring Index
• In experiments, anchor is experimentally imposed (eg:rolling a die before a decision; spinnign wheel of fortunebefore answering a question etc)
• In this paper, consider a self-generated anchor
• Lieder et al (2017) explore the possibility of self generatedanchors but again in an experimental setup
• Novel idea of this paper: measure anchoring bias from apotential self-generated (or nature generated) anchor usingactual household survey data (not part of an experiment)
• Anchoring index: ratio of two differences (numeratorwould be the difference in the actual guesses made by anindividual when exposed to the different anchors and thedenominator would be the actual measured difference inthe values of the anchors)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Anchoring Index
• In experiments, anchor is experimentally imposed (eg:rolling a die before a decision; spinnign wheel of fortunebefore answering a question etc)
• In this paper, consider a self-generated anchor
• Lieder et al (2017) explore the possibility of self generatedanchors but again in an experimental setup
• Novel idea of this paper: measure anchoring bias from apotential self-generated (or nature generated) anchor usingactual household survey data (not part of an experiment)
• Anchoring index: ratio of two differences (numeratorwould be the difference in the actual guesses made by anindividual when exposed to the different anchors and thedenominator would be the actual measured difference inthe values of the anchors)
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Creating an Anchoring Index inthis Context
• Replicating a similar anchoring index for our analysis is notentirely obvious.
• This is primarily because of two constraints.
• One potential anchor here is the natural disaster which is adummy variable (difference is 1-0, so denominator alwaysbecomes 1)
• If log of outstanding loans is used as the anchor, the unitsof measurement for such a variable is not the same as theunits of measurement of confidence ratings.
• Therefore, I propose to use an adjusted anchoring index tofit this particular analysis.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Creating an Anchoring Index inthis Context
• Replicating a similar anchoring index for our analysis is notentirely obvious.
• This is primarily because of two constraints.
• One potential anchor here is the natural disaster which is adummy variable (difference is 1-0, so denominator alwaysbecomes 1)
• If log of outstanding loans is used as the anchor, the unitsof measurement for such a variable is not the same as theunits of measurement of confidence ratings.
• Therefore, I propose to use an adjusted anchoring index tofit this particular analysis.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Creating an Anchoring Index inthis Context
• Replicating a similar anchoring index for our analysis is notentirely obvious.
• This is primarily because of two constraints.
• One potential anchor here is the natural disaster which is adummy variable (difference is 1-0, so denominator alwaysbecomes 1)
• If log of outstanding loans is used as the anchor, the unitsof measurement for such a variable is not the same as theunits of measurement of confidence ratings.
• Therefore, I propose to use an adjusted anchoring index tofit this particular analysis.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Adjusted Anchoring Index
Let the anchoring index take the following form:
AI =| c1−c0
c1|
µ1−µ0µ1
· 100
where:
• ci represents the mean level confidence in the given publicinstitution among households who have experienced statei , where i = 1 indicates the natural disaster and i = 0indicates otherwise.
• µi represents the mean level of loan outstanding amonghouseholds who have experienced state i , where i = 1indicates the natural disaster and i = 0 indicatesotherwise.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Calculating the Anchoring Index
µ1 µ0 c1 c0 AI(1) (2) (3) (4) (5)
Borrowing 6.17117 4.69405
Courts 1.55065 1.61077 16.21
Panchayats 1.04996 1.09867 19.39
State Government 1.08322 1.09038 2.76
Government Hospital 1.38785 1.45173 19.22
Notes: The sample is households in the IHDS-II dataset (2011-12). All the variables are as described in thetext. The AI has been calculated as per the anchoring index formula proposed in the text. The AI numberscan be interpreted as what percentage does the confidence in the relevant public institution decrease ifborrowing is doubled when exposed to the natural disaster vis-a-vis not being exposed to the natural disaster.All calculations are based on the raw statistics from the sample.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Conclusions
• Empirical evidence of a bias in self reported measures ofconfidence in public institutions
• Personal problems like indebtedness can affect ratings by2-4%
• Important for policy makers and researchers to realize thepresence of such bias
• Such bias maybe due to behavioral considerations such asanchoring
• People may have trouble making an absolute evaluation,hence “clutching for straws” and using thumb-rules
• First attempt at quantifying such a real-life bias using theconcept of anchoring index
• For a 100% increase in borrowing (when exposed randomlyto the natural disaster), confidence in courts reduce by16%, confidence in panchayats and government hospitalsgoes down by 19% whereas confidence in stategovernments declines by 2.76%.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
Conclusions
• Empirical evidence of a bias in self reported measures ofconfidence in public institutions
• Personal problems like indebtedness can affect ratings by2-4%
• Important for policy makers and researchers to realize thepresence of such bias
• Such bias maybe due to behavioral considerations such asanchoring
• People may have trouble making an absolute evaluation,hence “clutching for straws” and using thumb-rules
• First attempt at quantifying such a real-life bias using theconcept of anchoring index
• For a 100% increase in borrowing (when exposed randomlyto the natural disaster), confidence in courts reduce by16%, confidence in panchayats and government hospitalsgoes down by 19% whereas confidence in stategovernments declines by 2.76%.
Do BehavioralBiases AffectPerceptions
AboutEfficacy?
SomdeepChatterjee
IIM Lucknow
Introduction
Background
Literature
ConceptualFramework
Estimation
Data
Identification
Results
Conclusions
THANK YOU
