Using two strategies, we show that consumers underreact to taxes that are not salient. First, using a field experiment in a grocery store, we find that posting tax-inclusive price tags reduces demand by 8 percent. Second, increases in taxes included in posted prices reduce alcohol consumption...

We explore economic model of health behaviors. While the standard economic model of health as an investment is generally supported empirically, the ability of this model to explain heterogeneity across individuals is extremely limited. Most prominently, the correlation of different health...

Revealed preferences are tastes that rationalize an economic agent's observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption...

We provide evidence that a tradition of village democracy is associated with the presence of national democracy today. We also show that a tradition of local democracy is associated with attitudes which are more supportive of democracy, with better quality institutions and with higher levels of...

People have present-biased preferences: they choose more impatiently when choosing between an immediate reward and a delayed reward, than when choosing between a delayed reward and a more delayed reward. Following McClure et al. [McClure, S.M., Laibson, D.I., Loewenstein, G., Cohen, J.D. (2004)....

A critical issue in climate change economics is the specification of the so-called “damages function†and its interaction with the unknown uncertainty of catastrophic outcomes. This paper asks how much we might be misled by our economic assessment of climate change when we employ a...

We study an investment model in which agents have the wrong beliefs about the dynamic properties of fundamentals. Specifically, we assume that agents underestimate the rate of mean reversion. The model exhibits the following six properties: (i) Beliefs are excessively optimistic in good times...

We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the United States and how long it takes. About 60% of the letters were returned, taking over six months, on average. The results provide new...