CAGE SUMMER SCHOOL LAB EXPERIMENTS

Research methods Festival 2012: Bringing the lab to the fieldANANDI MANI, UNIVERSITY OF WARWICK & CAGETypes of Experiments (Harrison-List JEL)______AFE_________FFE_________NFE______________________________Lab [field experiments] NE, PSM, IV, STR, etc.

Conventional lab experiment (Lab)employs a standard subject pool of students, an abstract framing, and an imposed set of rulesArtefactual field experiment (AFE)same as a conventional lab experiment but with a non-standard subject poolFramed field experiment (FFE)same as an artefactual field experiment but with field context in the commodity, task, information, stakes, time frame, etc.Natural field experiment (NFE)same as a framed field experiment but where the environment is the one that the subjects naturally undertake these tasks, such that the subjects do not know that they are in an experiment

Motivation Development Economists have been doing Field Experiments using Randomized Control Trials (RCTs) for over a decade now, addressing a wide range of questions, e.g.Do Cameras in Schools improve Teacher Attendance & Student Outcomes?Does Microfinance spur Business Investment among the poor? Some of these RCTs come under criticism for a lack of light on the Mechanisms underlying the observed findings (Deaton(2009))Lab Experiments may help identifyPotential Reasons for Certain Outcomes Observed in Survey DataMechanisms Underlying Some Field Experiment Findings, which would help increase the External Validity Advantages of Lab ExperimentsBetter Control: Lab Experiment Design makes it feasible to generate results ceteris paribusTesting alternative theoretical mechanisms Test Institutions (e.g. Auction formats)Scope for Replication & Comparison across Cultural SettingsCheaper Market Design Pilots

Less suitable for measuring macro effects or situations where many participants are needed to measure outcomesArtificial Environment? Subject pool used often consists of students

4Outline of TalkApplications:(A) GENDER DIFFERENCES IN PRODUCTIVITY & PAYFact 1: Capital Returns (de Mel et al -- 2009): Lower returns of Women owned firms associated with less supportive spouses Q: Could Intra-Household Decision-Making Play a role in this? Fact 2: Women in the US earn 75% of what men do on the labor market and education, experience, hours worked dont explain more than 50% of itQ: Gender Differences in Competitive Behavior explain this gap? (B) POVERTY & DECISION-MAKING Fact 3: Poor seem to make irrational decisions on Savings, Human Capital Investment Q: Could Poverty Affect Stress Levels & Cognitive Ability? (C) PITFALLS OF LAB EXPERIMENTS & POSSIBLE SOLUTIONS

Intra-HH DecisionsHow does decision- making work within the family?Laws about Property Rightsand InheritanceEntrepreneurship/Income Generation ProgramsSchemes to encourageHuman capital investmentDoes it amplify the inequities of market outcomes for its members, or does it mitigate them?HH Decision-Making: Experiment QuestionsAssuming that HH members do not share a common set of preferences

Q1: Is HH decision-making efficient i.e. do members maximize HH (Investment) returns ? OR

Q2: If not, why do they sacrifice HH income? Is it for economic reasons for instance, greater bargaining power/ control over HH resources (how much?)or for other socially influenced reasons? and do they do this only when their spouse wont know?

7Unitary HH a common set of preferences Collective HH weighted sum of individual preferences, weights based on bargaining power

Unitary Model a common set of preferences are maximized, either becauseThe HH head is a dictator and it is his/her preferences that are maximized. (He/she may be altruistic or not) All HH members have *identical* preferences. Both these cases seem somewhat unrealistic, but the implication of a Unitary model is that consumption choices of the HH would not depend upon income or bargaining power of individual members.

Example of U-model: Becker(19xx), Samuelson(19yy)

(2) Collective Models where a weighted sum of preferences is maximized. Preference weights depend upon individual members bargaining power so their income does influence what is spent on by the HH as a whole. a la Becker vs. Competing Models: -- Lundberg & Pollak, Manser-Brown(1980), McElroy-Horney(1981)--Chiappori (Efficiency) Arguments for an Experimental ApproachOne-phrase Summary of Survey Based Empirical Studies of HH resource allocation decisions: Cant be sure!Allocation decisions directly observed real-timeNo need to infer decisions from data reported ex-post Survey responses may adjusted to fit local social and cultural norms(Bertrand-Mullainathan(2001)), whereas...Actions speak better than wordsFocus on Investment rather than Consumption DecisionsNo scope for effects arising from possible substitutions outside the experiment

8Udry(1996): PARTICULAR CONTEXT Land Tenure system based on Use rights may be the source of the inefficiency, if so the inefficiency may not be general to all other parts of the world. Men and women hold separate plots, DEFN of HH DOES NOT ONLY include couples who are in an exclusive relationship with each other. Men may have multiple wives. The HH includes cases of spouses who are not in exclusive relationship with each other, or bear children only with each other this is not the definition of HH in many other parts of the world, hence the results on lack of efficiency may be particular to this region (and its definition of HH).If land ownership is based on user-rights, not on legal title, then the efficiency in labor allocation across plots may be driven by this fact. HH Inefficiency may be driven by this feature of land rights and may not generalize to other regions where legal title is the basis for land rights.

THINK ABOUT UNDERLINED POINT: In Udrys data, we observe inefficiency, but if we take into account use-based title to land then wifes behavior is not inefficient. Sure, but her behavior finally points out that people care about having CONTROL over HH resources by themselves, just as my experiment does. SO SHOULD I MENTION THIS POINT AT ALL, OR HAVE UDRY AS THE EXAMPLE?

COULD LOOK AT DUFLOS S.AFRICA PAPER, TO SEE WHAT UNOBSERVABLE ENVIRONMENTAL FACTOR LED TO THE EVIDENCE BEING INCONCLUSIVE Experiment Location & Sample Anantapur district, Andhra Pradesh (2nd most drought prone)

300 couples, from 32 villages -- all wives members of Self-Help Groups (SHGs) run by a single NGOPromised Participation Fee (Rs.50 about 62p), roughly equal to daily wages, with scope to make more based on their performance

Experiment Protocol3-4 villages participating daily (10 day experiment) Participating couples from each village brought in to NGO location Separate waiting area for men and womenThree couples taken to six separate rooms, where..Experiment explained and options presented by a coordinatorData recorded by two independent data entry staff Separate waiting areas for male and female participants who completed the experiment Individual payment to participants upon completion Participants taken back to village when all payments completed10Would have liked to have given written instructions but the illiteracy rate in the area was just too high.Increased the costs of operation considerably, wrt logistics and number of coordinators neededp 11

Experiment TasksNo TradeoffInvestor Tradeoff between higher HH income and own control over it4 Investment Decisions for each Spouse, individually presented in random orderTask: Allocate Rs.50 (seed money) across two Investment options Blue and Red Efficient Investment Allocation = Rs. 50 in Blue

11Investment MeansINVESTOR CONTROL OVER INCOMEALLMENWOMENN=502N=250N=252(1) (2) (3) Fixed Share44.9542.247.68(11.42)(13.24)(8.44) Low Control36.6334.9438.32(19.27)(18.33)(20.06) Medium Control 38.3035.6240.98(18.77)(18.85)(18.35) High Control 43.3741.3645.36(14.93)(15.92)(13.63)Overall Mean Investment - (across 4 decisions)40.8138.5343.09(16.75)(17.03)(16.18)p 12Efficient Investment: Rs.50 in Blue option Both Men and Women are Inefficient.

Theyre willing to sacrifice HH income, to gain more control over it for themselves.

But Men dont maximize HH returns even if their share of control is Fixed! WHY??

12Fraction of Efficient HHs

A third of men are inefficient even when their share of control is Fixed i.e. they undercut their own income (and their wifes) rather than maximize HH returns

Irrationality not explained by low education/confusion, lack of experience with financial decisions, longer term effects on bargaining power within HH Why are Men inefficient under Fixed SharesMen dont like it when their wifes share exceeds theirsWhen her share>50%They are willing to undercut their own income.. to ensure she does not earn too much more than themselves.

Wives of Spiteful Husbands are more inefficient in other three decisions, where Control over HH income depends upon investment allocation. CONCLUSION: Consistent with de Mel et al(2009) finding, Less cooperative spouses => Lower Productivity on Womens BusinessesGender Earnings Gap: MotivationPOTENTIAL SOURCES OF GENDER GAP IN LABOR MARKET OUTCOMESOccupation choiceExperience & Continuity in labor market participationDiscriminationPsychological factorsStereotype threat Claude Steele (1997): Additional anxiety causes choking under pressure when performing a task Ambady et al (1999), Psychological Science

Self-Confidence

Competitive Behavior Steele(1997): A threat in the Air: How Stereotypes shape intellectual identity & performance: American Psychologist, LII 613-629Ambady, N., Shih, M., Kim, A., & Pittinsky, T. L. (2001). Stereotype susceptibility in children: Effects of identity activation onquantitative performance. Psychological Science, 12(5), 385390.15 Performance under CompetitionGender Differences: Gneezy-Niederle-Rustichini(2003, QJE)-SummaryLab Experiment conducted in Israel with students from TechnionParticipants Task: Solving Mazes on a computerStudied Participants performance under three payment schemes (a) Non-competitive (Piece rate compensation) (b) Competitive (Winner-take-all tournament) (c) Random pay setting (One person in Group of 6 is paid, rest are not)Main findings: Mens performance improves considerably going from (a) to (b), whereas womens performance does not changeWomens performance is much worse when their tournament group includes men than when it has only women16Do Women prefer to Compete less?Niederle-Vesterlund( Aug 2007, QJE) Women may choose lower powered jobs for multiple reasons: Responsibility & Time demands of such jobs, given family considerationsDiscrimination may discourage attempts to obtain these jobs Competitive Pressure of such jobs?Experiments allow choice of tasks with similar time demands, where innate abilities do not differ among men and women, and discrimination is ruled outTheories (about why women shy away from high-profile jobs): They mayDislike CompetitionLack Confidence, relative to menBe Risk AverseHave Feedback Aversion (Theyre more discouraged by negative feedback). Experimental Design makes it possible to distinguish among various channels

17Experiment DetailsLab experiment with students at University of Pittsburgh, groupsTask: Addition of sets of five 2 digit-numbers, for five minutesInformation to Participants: Only on own absolute performance, no information on others performance. Information provided real time, as task is performed. Studied Payment Scheme Choice of Men vs. Women: Piece-rate vs. Winner-take all (Competitive) scheme, given information above.4 participants per group, two male and two female (20 groups)

18Experiment DesignTask 1: Piece rate (PR) of $0.5 per correctly solved additionTask 2: Tournament (T; winner take all) rate of $2 per correctly solved addition At a 25% chance of tournament win, both payment schemes generate the same expected payoff.Tournament payoff is in per task terms to avoid guesswork about what would be a high enough fixed payment to induce tournament entry among high performersTask 3: First choose payment scheme (PR or T) and then do addition taskParticipants evaluated against others performance in Task2 why? Eliminates effects of beliefs about others choice on decision 10,000 (feasible) groups made with replacement from the data, avg. across 100 trials to determine individual success probability in tournament.Task 4: Choose payment scheme (PR or T) for (previous) Task 1; No new task To separate the preferences for competition from other factors such as risk aversion & feedback aversion , on tournament entry decisionAsk participants to guess their rank in task 1 and task 2 in their group of fourTo measure effects of self-confidence on tournament entry and performance

19Main FindingsMen and Women are equally good at Addition Task under Piece Rate and Tournament. Despite this, being a woman reduces probability of selecting Tournament payment scheme in Task 3 by 38% Not explained by individual performance in previous rounds (T1,T2) or current round (T3) itself. For women, total expected cost of under-entry is much larger than cost of over-entry; for men its the reverse Despite accounting for differences in Self-confidence, being female still reduces Tournament entry probability by 27.8%

Taking the Lab Design to the FieldPotential Concerns with the above 2 Experiments: Experiment 1: Performance could be influenced by Task specific differences in ability (men have advantage in spatial ability and arm-throwing capacity) -- so mazes may not be to womens advantage.

Experiment 2: Womens observed Preferences for Competition may be due to being socialized to believe they are worse competitors than men or that their behavior should be ladylike (less aggressive) ?

Gneezy-Leonard-List (2007) address both these concerns How? Socialization: Repeat similar experiment design in one Matrilineal & Matrilocal tribe and one Patriarchal tribe Task: Task unfamiliar to people in both tribes***LOOK OVER CONCLUSIONS OF LIST PAPER IF POSSIBLE***21Lab-in-the-Field: DesignMaasai (Tanzania): PatriarchalMen treat us like donkeys Maasai woman (Hodgson (2001))Khasi (NW India): Matrilineal We are sick of playing the roles of breeding bulls and baby-sitters Khasi man (Ahmed (1994) Subjects in 2 groups, randomly paired with 1person from other group (paired subject identity/sex not known) Task: Throw tennis ball into bucket 3 metres away (10 chances per subject) Payment Scheme: X per success irrespective of paired subject performance OR 3X per success if own performance better than paired person X=Rs.20 in India; X = 500 shillings in TanzaniaMaasaiMaasai men choose to compete at twice the rate that women doSimilar to findings in Western settings

Maasai vs. KhasiKhasi women choose to compete at twice the rate that men doAnd even at a rate slightly higher than Maasai men

Authors Conclusion: Any number of subtle influences on children or adults can cause differences in attitudes to competition -- even if the behavior is broadly framed by genetic endowmentKhasi society may remove social barriers that otherwise prevent naturally competitive women from expressing their true personalitiesOR it may allow competitive women to earn greater rewards for their effort and pass on their wealth to their daughters, both of which increase fecundity of their competitive genes

24 Poverty, Stress & Cognitive CapacityUSING SUGARCANE HARVESTS TO UNDERSTAND THE PSYCHOLOGY OF POVERTY

Poverty, Cognitive Capacity & Decisions-1A fundamental assumption of Economics is the Scarcity of ResourcesYet the Rational Model assumes that Mental Capacity is Infinite ! But Decision-Making Takes Mental Effort, and its Tiring!

Question: Does the State of Being Poor affect Cognitive Capacity? (Mani-Mullainathan-Shafir)

Sugarcane HarvestsLong Cycle Crop about 11 monthsFarmers are down to the wire a few weeks before Harvest Receive Lump sum Returns a few weeks after Harvest Sugar Mills assign Cutting Dates to individual farmers, hence farmers dont have control over when their Income arrives Methodology: Compare Individual Farmers before vs. after Harvest on Measures of:Stress: Blood Pressure, Heart Rate (Round 1-- 2009)Cognitive Capacity & Attention: IQ(Ravens) tests, Stroop tests (Round 2 2011)Ravens IQ Test

Stroop Tests Coffee

House

Train

Window

Monkey

Brick

Stroop Tests Green

Stroop Tests Red

Stress Measures: Blood Pressure

IQ Measure: Ravens Test

Cognitive Depletion: Stroop

Summary of FindingsMain Findings: Poverty in the Pre-Harvest PeriodRaises Stress LevelsLowers IQ & Cognitive Capacity

Comments: These findings are not driven byAdverse Nutritional changes pre-harvestLearning Effects post-harvest (for IQ tests)

Potential Pitfalls and some SolutionsLack of AnonymityMay elicit more pro-social behavior when observedSolution: Double blind experiments, Outcome measure unclearContext and Framing Label Wall Street game vs. Community game affects playSolution: Neutral wording; Collect Background data on subjectsSelf-Selection in ParticipantsBiased sample -- Could be a problem in all Field ExperimentsSolution: Conduct experiment in different settings Low Stakes may elicit non-serious behaviorSolutions: Vary stakes, Treat results as lower/upper bound, Use suitable subjectsRelevance of Lab decisions to real behavior? Track correlation b/w the two (e.g. Karlan(2005) AER) Trust game outcome and Repayment of Microfinance Loan a year later THANK YOU! Sheet1TABLE 2: 'CONTROL OVER HOUSEHOLD INCOME' TREATMENTSSeed money for Investment (provided by experimenter) = Rs.50; Household chooses X and Y'Control over Household Income ' TreatmentsIncome from Blue Investment=X, Return=2XIncome from Red Investment=Y=(50-X), Return=1.5YRecipientPaid inAmountRecipientPaid inAmount(1) Fixed Share=s,SpousePvt. a/cs.2XSpouseOwn a/cs(1.5)Y(0.3 s 0.7)SelfOwn a/c(1-s)2XSelfOwn a/c(1-s)1.5YInvestor Control overSpouse's income(2) LowSpousePvt. a/c2XSelfOwn a/c1.5Y(3) MediumSpouseCash2XSelfOwn a/c1.5Y(4) HighBothJoint a/c2XSelfOwn a/c1.5Y

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