Funding Opportunity: Behavioral Economics

Submission Deadlines: See upcoming deadlines

The Russell Sage Foundation's program on Behavioral Economics supports innovative research that uses behavioral insights from psychology, economics, sociology, political science and other social sciences to examine and improve social and living conditions in the United States. We seek investigator-initiated research proposals that will broaden our understanding of the social, economic and political consequences of real-life behaviors and decisions. RSF is especially interested in research that contributes to our understanding of topics of interest under its other programs—Future of WorkRace, Ethnicity and ImmigrationSocial Inequality

The following examples illustrate, but do not exhaust, the topics and types of research the foundation would be interested in supporting:

Poverty, Inequality and Mobility

Recent studies find that poverty and other forms of resource scarcity burden people's mental capacities and leave less 'mind' for other concerns. What does it mean for people's lives and their ability to function and make decisions? Behavioral insights may give us a better understanding of how financial scarcity, and individuals’ responses to it, affects their lives. For example, in Scarcity: Why Having Too Little Means So Much (2014), Mullainathan and Shafir show that scarcity creates a distinct psychology for everyone struggling to manage with less than they need, including why the poor and those maxed out on credit cards may fail to manage their money, and contribute to persistent poverty.

Public perceptions about inequality and mobility are often inaccurate. For example, Ariely and Norton (2011) show that there is a significant difference between what Americans think the distribution of wealth is (somewhat even), what they would prefer (more even than socialist Sweden), and how wealth is actually distributed. Behavioral insights may help us understand why individuals misperceive information, the consequences of such biases, and how these misperceptions might be corrected.

Labor Markets

Compared to other fields, the progress in applying behavioral insights to labor economics has been more uneven and scattered. In the early days, Kahneman, Knetsch and Thaler (1986) provided survey evidence on notions of fairness which could justify the observed wage compression in several industries. Further, Thaler (1989) found that behavioral factors could help understand puzzling features of inter-industry wage differentials.More recently, Shapiro (2005) finds high impatience among food-stamp recipients, implying a significant preference for immediate consumption. Oreopoulos (2007) provides evidence of high impatience among students who drop out of school, forgoing high future returns of schooling. In the job search realm, DellaVigna et al. (2014) observe that newly unemployed individuals search hard for a job in response to loss of income, but over time, they may get used to the lower level of income and search less. They then search hard again in anticipation of unemployment benefits being cut, but ultimately may get use to this as well (reference dependence with a backward looking reference point).

Parenting and Child Development

Resource scarcity may also influence parenting and child development. Research shows that the gaps in children’s achievement and behavior are due in part to the differences in parenting in rich and poor families. Using insights from behavioral economics, Gennetian et al. (2014) examine ways in which small design features of interventions (e.g. opt-in defaults, reminders, social norm messaging) can be adjusted to augment the impacts of early education and care initiatives, potentially improving parent engagement and children's developmental outcomes, especially for lower-income families.

Research in behavioral science offers insights into the difficulty of behavior change. For example, decisions that involve tradeoffs between costs and benefits occurring at different times (i.e., intertemporal choices) and the tendency to over-value immediate rewards at the expense of long-term intentions (i.e., present bias) may make it hard for parents to give up leisure (or work) today in order to invest time and effort for a distant return in children’s human capital. Kalil (2014) uses behavioral insights to better understand what motivates parents to invest in their children and to inform the design of policies to reduce inequality in children’s skill development. Research by Andreoni and Sprenger (2012) also shows that for low-income parents a tendency to discount the future may arise from uncertainty about whether the time and effort they spend on their children will help their child succeed.

Racial and Ethnic Bias

Recent studies have documented the existence of in-group racial biases in employment, criminal, judicial and educational settings. While social and legal changes have eliminated many institutionalized forms of racial discrimination, the same policy tools may have less leverage against implicit racial stereotypes. For example, Bertrand and Mullainathan (2003) provide evidence that race affects the benefits of a better resume—for Caucasian names, a higher quality resume elicits 30 percent more callbacks whereas for African American names, it elicits a far smaller increase—suggesting that racial discrimination is still a prominent feature of the labor market. In another study, Pope et al. (2014) show that individual NBA referees became unbiased after being made aware of their racial biases in referee calls of personal fouls through widespread media exposure, suggesting that raising awareness of even subtle forms of racism can bring about meaningful change.

Public Finance

Behavioral insights have played the most obvious role in finance, where behavioral finance has become its own thriving field. A better understanding of human behavior may provide a more useful framework for analyzing public finance issues, such as social insurance, income support and redistribution, and taxation. For example, in Policy and Choice (2011), Congdon, Kling, and Mullainathan explore how psychological factors, like framing, help reshape key concepts in public finance, such as moral hazards (e.g. unemployment insurance muting the incentives of unemployed individuals to return to work) and deadweight loss (e.g. taxation). More recently, Chetty et al. (2014) use Danish administrative wealth data to show that defaults are a more effective way to increase savings rates than changes in tax subsidies.

Choice Architecture

Choice architecture describes the different ways in which options can be presented to consumers, and the impact of that presentation on decision-making. For example, in Nudge: Improving Decisions About Health, Wealth, and Happiness (2009), Thaler and Sunstein show how choice architecture can successfully nudge people toward better decisions. More recently, Johnson et al. (2013) examine how well people make choices, how well they think they do, and what can be done to improve these choices in the new health insurance exchanges. They show that performance can be improved by providing calculation aids and by choosing a "smart" default.

Application Information


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