Working papers

Breaking Bad: How Health Shocks Prompt Crime.

with S. Andersen, and G. Parise. 

Presented at EDHEC Business School, and HEC Paris.

Abstract: In this paper, we explore the impact of health shocks on criminal behavior. To identify causal effects, we rely on the random timing of cancer diagnoses to construct counterfactual crime rates based on yet-to-be-diagnosed individuals. We find that health shocks increase the probability of committing a crime by 13%. We uncover evidence for three channels governing this effect. Diagnosed individuals (i) seek illegal revenues to mitigate the loss in human capital, (ii) face lower expected cost of punishment through a lower survival probability, and (iii) revise their set of preferences. The documented effect is stronger for people who lack insurance through preexisting wealth, home equity, education, or spousal support. We show that welfare programs that alleviate the economic repercussions of health shocks can mitigate the ensuing negative externality.

Ambiguity Attitudes about Investments - Evidence from the Field,

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

Presented at Society for Experimental Finance Conference.

Abstract: Using an incentivized survey and a representative sample of investors, we elicit ambiguity attitudes toward a familiar company stock, a local stock index, a foreign stock index, and a crypto currency. We separately estimate ambiguity aversion (ambiguity preferences) and perceived ambiguity levels (perceptions about ambiguity), while controlling for unknown likelihood beliefs. We show that ambiguity aversion is highly correlated across different assets and can be summarized by a single underlying factor. By contrast, individuals’ perceived ambiguity levels differ depending on the type of asset and cannot be summarized by a single underlying factor. Perceived ambiguity is mitigated by financial literacy and education, while the preference component is correlated with risk aversion. Perceived ambiguity proves to be related to actual investment choices, validating our measure. Finally, our results imply that policies enhancing financial literacy and knowledge of financial markets can help stimulate equity market participation and reduce inequality, as these reduce peoples’ perceived levels of ambiguity about financial assets.

Work in progress

Portfolio Network Effects: Family, Colleagues, or Neighbors? with S. Andersen and O. Balakina.

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