Interests

Behavioral Economics, Development Economics, Experimental Methods

I am broadly interested in applied microeconomics. More specifically, I seek to understand how norms, behavioral biases, and contractual structures influence individual as well as group decision making and which consequences arise for institutional or product design. I am further interested in how insights from behavioral economics can help inform development economics.

I currently focus on behavioral aspects such as biases and norms in two fields: microfinance (savings, credit, reputational systems) and group interactions (communication, coordination and sanctions). In my studies, I use experimental methods ranging from the lab to the field to identify causal effects and I often complement these data with administrative and/or survey data.

 

Job Market Paper

Cash in Hand and Saving Decisions of the Poor, Link

Savings accounts are a promising tool for reducing poverty, but the use of savings accounts is often puzzlingly low. In many developing countries, poor households receive their income in cash. Holding on to cash that needs to be physically deposited into a savings account might increase the psychological costs of saving. This study identifies the causal effect of physically holding cash on the savings deposits of microfinance clients. I pay participants cash to take part in an interview, and then allow them to deposit some of this payment in their existing savings accounts. To identify the effect of cash in hand, I exogenously vary the timing of the payment. Participants who receive their earnings up front (cash in hand) hand over the cash to be saved, whereas participants in the control group receive their earnings just after verbally stating the amount to be saved. I do not find an overall cash in hand effect, but I provide evidence suggesting that this is due to two counter-balancing effects: higher perceived wealth that increases savings (perceived income effect) and a psychological cost that decreases savings (pain of handing over cash). These results are of interest for both development and behavioral economics, because they show that cash in hand does not bias savings decisions, since two effects of boundedly rational decision making cancel each other, and actual behavior seems as if it was rational.

SABE/IAREP/Elsevier Best PhD Student Paper 2018

 

Publications

I lie? We lie! Why? Experimental Evidence on a Dishonesty Shift in Groups, with Martin Kocher & Simeon Schudy, Management Science (2018), 64 (9): 3995-4008. Link

Unethical behavior such as dishonesty, cheating and corruption occurs frequently in organizations or groups. Recent experimental evidence suggests that there is a stronger inclination to behave immorally in groups than individually. We ask if this is the case, and if so, why. Using a parsimonious laboratory setup, we study how individual behavior changes when deciding as a group member. We observe a strong dishonesty shift. This shift is mainly driven by communication within groups and turns out to be independent of whether group members face payoff commonality or not (i.e. whether other group members benefit from one’s lie). Group members come up with and exchange more arguments for being dishonest than for complying with the norm of honesty. Thereby, group membership shifts the perception of the validity of the honesty norm and of its distribution in the population.

Coverage (selected): International Business Times, Public Management (December 2017, p.19), Analytics Magazine, PsychCentral, ScienceDaily, Harvard Business Manager (January 2018, pp. 18-19, in German), WirtschaftsWoche (13/2018, pp.84-87, in German), Wirtschaftspsychologie aktuell (2/2018, pp.9-12, in German) Deutschlandfunk Nova (radio interview, in German), NZZ (in German), SZ (in German), Haufe (in German), Creditreform (in German), Informationsdienst Wissenschaft (in German), Welt kmpkt (in German),  alltagsforschung.de (in German), Latest Thinking (interview with Simeon Schudy)

 

Working Paper

High Loan Repayment Without The Peer Pressure? Repayment Flexibility vs. Joint Liability in Microfinance, with Kristina Czura & Anett John

Joint-liability groups and rigid repayment schedules have long been considered essential for guaranteeing high repayment rates in microcredit lending, since they offer mutual insurance and keep repayment discipline high. Yet, both features have been criticized lately: rigid repayment schedules interfere with fluctuating incomes, and joint liability induces excessive peer pressure. We study whether the interaction of both flexible repayment features and joint-liability allows reaping the benefits of joint liability and flexibility – high repayment and shock coping capacity – while keeping their downsides – low repayment morale and excessive peer pressure – at bay. Using data from lab-in-the-field experiments with microcredit borrowers in the Philippines, we find that interacting joint liability with repayment flexibility enhances the responsible use of flexibility and reduces anti-social punishment.

 

Work in Progress

The Effects of Information Sharing on Moral Hazard in Credit Markets – Evidence from a Randomized Evaluation in the Philippines, with Kristina Czura & Matthias Fahn

We theoretically and experimentally study how the introduction of a credit registry affects investment and repayment decisions of borrowers. Information sharing between lenders can affect repayment rates via two mechanisms, i) better screening by lenders and ii) an additional incentive for borrowers to repay. In contrast to most previous studies, we can exclude selection effect and potential changes in the borrower pool and cleanly identify the incentive effect of information sharing on borrowers. We conduct an information campaign with 6,000 microfinance clients to exogenously vary the knowledge of the credit registry and possible consequences for borrowers. Our design allows identifying both the effects on ex-ante moral hazard (project and effort choice) and ex-post moral hazard (repayment performance).

 

Social Punishment in Social Dilemmas, with Florian Diekert & Peter Martinsson

Using Referrals to Increase Retention, with Kristina Czura, Florian Englmaier & Hoa Ho

Communicating Complex Incentives, with Kristina Czura, Florian Englmaier & Hoa Ho

 

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