This paper asks whether increasing productivity in the electricity sector can yield larger long-run GDP gains than suggested by electricity's small share of aggregate economic activity. We answer this question using a dynamic multi-sector model in which electricity is a strong complement to...

We study the role of risk preferences and frictions in portfolio choice using variation in 401(k) default options. Patterns of active choice in response to different default funds imply that, absent participation frictions, 94% of investors prefer holding stocks, with an equity share of...

We develop a dynamic model of firm investment under uncertainty that captures firms' risk attitude using quantile preferences. The firm maximizes its present value, defined as current profits and investment plus the discounted value of the τ-quantile of its value next period. In our framework,...

The impact of exposure to a major unanticipated natural disaster on the evolution of survivors' attitudes toward risk is examined, exploiting plausibly exogenous variation in exposure to the 2004 Indian Ocean tsunami in combination with rich population-representative longitudinal survey data...

We measure individual-level loss aversion using three incentivized, representative surveys of the U.S. population (combined N=3,000). We find that around 50% of the U.S. population is loss tolerant, with many participants accepting negative-expected-value gambles. This is counter to earlier...

We use four incentivized representative surveys to study the endowment effect for lotteries in 4,000 U.S. adults. We replicate the standard finding of an endowment effect--the divergence between Willingness to Accept (WTA) and Willingness to Pay (WTP), but document three new findings. First, we...

For many Americans the question of when to claim Social Security benefits is one of the most consequential financial decisions they will ever face. While acknowledging that individuals differ in terms of optimal timing for starting Social Security benefits, many economists argue that an average...

This paper defines risk-on risk-off (RORO), an elusive terminology in pervasive use, as the variation in global investor risk aversion. Our high-frequency RORO index captures time-varying investor risk appetite across multiple dimensions: advanced economy credit risk, equity market volatility,...

Since 2007, an increase in risk or risk aversion has resulted in a US dollar appreciation and greater deviations from covered interest parity (CIP). In contrast, prior to 2007, risk had no impact on the dollar, and CIP held. To explain these phenomena, we develop a two-country model featuring...

We consider the optimal policy problem of a benevolent planner, who is uncertain about an individual's true preferences because of inconsistencies in revealed preferences across behavioral frames. We adapt theories of expected utility maximization and ambiguity aversion to characterize the...