Ban the Box
“Ban the Box, Criminal Records, and Statistical Discrimination: A Field Experiment,” by Amanda Y. Agan and Sonja B. Starr. June 2016. SSRN #2795795.
People who have been incarcerated have greater difficulty finding subsequent employment. That, in turn, puts them under economic stress and increases the likelihood that they will commit new crimes and return to prison. This is costly for both the ex-convicts and society.
A currently popular policy remedy to this problem is “Ban-The-Box” (BTB)—prohibiting employers from asking about criminal history (the notorious “Have you been convicted of a crime?” checkbox) on initial job applications. The intent of such policies is to increase employment among black males, who have disproportionately more criminal convictions than other applicant groups.
But a potential downside of this policy is that employers, fearing the risk of unknowingly employing a former criminal, will engage in more statistical discrimination because they are prohibited from eliminating criminals from consideration at the outset. That is, employers will reduce their consideration of young black men, in general, because the employers are prohibited from determining initially which of them have criminal records.
To test for this possibility, the authors of this paper sent 15,000 fictitious online job applications to employers in New Jersey and New York City before and after both jurisdictions enacted BTB laws. They found that before BTB, white applicants received 7% more callbacks, while after BTB whites received 45% more callbacks.
Most black men do not have criminal convictions. Under BTB policies they are not allowed to signal that fact to employers. As a result of this well-intended policy, they are losing work opportunities.
Are Consumers Rational About Energy Prices?
“Are Home Buyers Myopic? Evidence from Housing Sales,” by Erica Myers. July 2016. E2e Working Paper #24. Available at http://e2e.haas.berkeley.edu/working-papers.html
The regulation of the energy usage of automobiles, air conditioners, and furnaces is rationalized by the alleged inability of consumers to calculate and utilize future energy costs in their decisions about how much to pay now for durable investments that have differing future energy costs. This rationalization has been challenged by a number of empirical papers. For instance, the Winter 2015–2016 “Working Papers” includes a discussion of a paper analyzing used car sales from 1993 through 2008 in which a $1 increase in the present discounted value of the fuel cost over the remaining life of the vehicle resulted in a $1 decrease in the price paid for the vehicle. That is, consumers were rational and took into account future energy prices when they decided how much to pay for used cars.
The current paper compares prices in Massachusetts from 1990 through 2011 for houses that heat with oil versus houses that heat with natural gas. Oil and natural gas prices diverge from each other for exogenous reasons (hurricanes in the Gulf of Mexico, for example) and the paper asks whether consumers take the differences in heating costs into account when they determine how much to pay for a house. The paper finds that when the relative cost of heating increases by $1 per million BTUs, house prices decrease by $1,000–$1,200. This is consistent with the full capitalization of the present value of the cost increase at an 8%–10% discount rate.
Do energy-using products require regulation because consumers are myopic? The answer once again appears to be no.
