Working papers

Breaking Bad: How Health Shocks Prompt Crime.

with Steffen Andersen, and Gianpaolo Parise. Download paper. Download online appendix.

Presented at Aarhus University, BI Norwegian Business School, EDHEC Business School, Goethe University Frankfurt, HEC Paris, London Business School, Stockholm School of Economics, and the CEPR Household Finance seminar series.

Abstract: We explore the impact of health shocks on criminal behavior. Exploiting variations in the timing of cancer diagnoses, we find that health shocks elicit an increase in the probability of committing crime by 13%. This response is economically significant at both the extensive (first-time criminals) and intensive margin (reoffenders). We uncover evidence for two channels explaining our findings. First, diagnosed individuals seek illegal revenues to compensate for the loss of earnings on the legal labor market. Second, cancer patients face lower expected cost of punishment through a lower survival probability. We do not find evidence that changes in preferences explain our findings. The documented pattern is stronger for individuals who lack insurance through preexisting wealth, home equity, or marriage. Welfare programs that alleviate the economic repercussions of health shocks are effective at mitigating the ensuing negative externality on society.

Ambiguity Attitudes for Real-World Sources: Field Evidence from a Large Sample of Investors,

with Kanin Anantanasuwong, Roy Kouwenberg, and Olivia Mitchell. Download paper.

Presented at DIW Berlin, Society for Experimental Finance Conference, and EEA meeting.

Abstract:  Empirical studies of ambiguity aversion mostly use artificial events such as Ellsberg urns to control for unknown probability beliefs. The present study is the first to measure ambiguity attitudes for real-world sources in a large sample of investors. We elicit ambiguity aversion and perceived ambiguity for a familiar company stock, a local stock index, a foreign stock index, and Bitcoin. Measurement reliability is higher than for artificial sources in previous studies. Ambiguity aversion is highly correlated for different assets, while perceived ambiguity varies more between assets. Ambiguity aversion and perceived ambiguity are related to actual investment choices, validating the measures.

Work in progress

Experiments in Household Finance. S. Andersen, S. Dimmock, and K. Nielsen.