Miles Kimball

• University of Colorado Boulder

Happiness data—survey respondents’ self-reported well-being (SWB)—have become increasingly common in economics research, with recent calls to use them in policymaking. Researchers have used SWB data in novel ways—for example, to learn about welfare or preferences when choice data are unavailable or difficult to interpret. Focusing on leading exampl...

The effects of assortative mating (AM) on estimates from genetic studies has been receiving increasing attention in recent years. We extend existing AM theory to more general models of sorting and conclude that correct theory-based AM adjustments require knowledge of complicated, unknown historical sorting patterns. We propose a simple, general pur...

What utility notion—e.g. flow/lifetime, self/family-centered—do self-reported well-being (SWB) questions measure? Existing applications make different assumptions regarding the (i) life domains, (ii) time horizons, and (iii) other-regarding preferences captured by SWB data. To obtain relevant evidence, we ask survey respondents what they had in min...

We join the call for governments to routinely collect survey-based measures of self-reported wellbeing and for researchers to study them. We list a number of challenges that have to be overcome in order for these measures to eventually achieve a status that is competitive with traditional economic indicators. We discuss in more detail one of the ch...

Although technology-driven economic growth generates gains in consumption and employment opportunities, it may also negatively impact other dimensions of well-being, such as emotional well-being or sense of stability. We study 204 aspects of self-reported well-being among 1,576 US MTurk survey respondents, aggregated into seven themes: evaluative w...

The diffidence theorem, together with complementary tools, can aid in illuminating a broad set of questions about how to mathematically characterize the set of utility functions with specified economic properties. This article establishes the technique and illustrates its application to many questions, old and new. For example, among many other old...

Quadratic voting and the normalized gradient addition mechanism are both social choice mechanisms that confront individuals with quadratic budget constraints, but they are applicable in different contexts. Adapting one or both to apply to the same context, this paper explores the relationship between these two mechanisms in three contexts: marginal...

How should a survey-based measure of well-being be implemented? How could it be constructed in a systematic and politically neutral way? These questions should be approached by economists with the same level of care that has been taken in the theoretical and practical development of GDP. We focus on two essential requirements for implementation: fo...

As long as all interest rates move in tandem – including the rate of return on paper currency – economic theory suggests no important difference between interest rate changes in the positive region and interest rate changes in the negative region. Indeed, in standard models, only the real interest rate and spreads between real interest rates matter...

Cognitive economics is the economics of what is in people's minds. It is a vibrant area of research (much of it within behavioural economics, labour economics and the economics of education) that brings into play novel types of data, especially novel types of survey data. Such data highlight the importance of heterogeneity across individuals and hi...

There has been much discussion about eliminating the 'zero lower bound' by eliminating paper currency. But such a radical and difficult approach as eliminating paper currency is not necessary. Much as during the Great Depression-when countries were able to revive their economies by going off the gold standard-all that is needed to empower monetary...

We develop a theory that focuses on the general equilibrium and long-run macroeconomic consequences of trends in job utility. Given secular increases in job utility, work hours per capita can remain approximately constant over time even if the income effect of higher wages on labor supply exceeds the substitution effect. In addition, secular improv...

We survey 561 students from U.S. medical schools shortly after they submit their choice rankings over residencies to the National Resident Matching Program. We elicit (a) these choice rankings, (b) anticipated subjective well-being (SWB) rankings, and (c) expected features of the residencies (such as prestige). We find substantial differences betwe...

We propose a social choice rule for aggregating preferences elicited from surveys into a marginal adjustment of policy from the status quo. The mechanism is: (i) symmetric in its treatment of survey respondents; (ii) ordinal, using only the orientation of respondents’ indifference surfaces; (iii) local, using only preferences in the neighborhood of...

This paper helps provide foundations for survey-based tracking of well-being. First, we propose a theory in which utility depends on “fundamental aspects” of well-being, measurable with surveys. Second, drawing from psychologists, philosophers, and economists, we compile a comprehensive list of such aspects. Third, to estimate the aspects’ marginal...

Would people choose what they think would maximize their subjective well-being (SWB)? We present survey respondents with hypothetical scenarios and elicit both choice and predicted SWB rankings of two alternatives. While choice and predicted SWB rankings usually coincide in our data, we find systematic reversals. We identify factors-such as predict...

In ranking fiscal stimulus programs, it is useful to focus on the ratio of extra aggregate demand to extra national debt that results. This note argues that (because of repayment after the end of a recession) “national lines of credit”–that is, government-issued credit cards with countercyclical credit limits and favorable interest rates—would gene...

Are subjective well-being (SWB) measures a good empirical proxy for utility? We evaluate one necessary assumption: that people’s preferences coincide with what they predict will maximize their SWB. Our method is to present survey respondents with hypothetical scenarios and elicit both choice and predicted SWB rankings of two alternatives. While cho...

We propose and implement a novel approach for the identi…cation of "news shocks" about changes in future technology. In a VAR featuring a measure of observed aggre-gate technology, forward-looking variables, and macroeconomic aggregates, we identify the news shock as the shock orthogonal to observed technology innovations that best explains variati...

Early life experiences are likely to be important for the formation of preferences. Religiosity is a key dimension of preferences, affecting many economic outcomes. This paper examines the effect of college major on religiosity, and the converse effect of religiosity on college major, using panel data from the Monitoring the Future survey as a way...

This paper examines how aversion to risk and aversion to intertemporal substitution determine the strength of the precautionary saving motive in a two-period model with Selden/Kreps-Porteus preferences. For small risks, we derive a measure of the strength of the precautionary saving motive which generalizes the concept of "prudence" introduced by K...

Precautionary saving measures the consequences of uncertainty for the rate of change (and therefore the level) of wealth. The qualitative aspects of precautionary saving theory are now well established: an increase in uncertainty will increase the level of saving, but will reduce the marginal propensity to save. Quantitatively, theory combined with...

Using data from the April 2005 Survey of Consumers, we develop an index of investor so-phistication from a set of 14 quiz-like questions. We correlate our measure of sophistication with holdings of international investments, measures of diversification, and holdings of an employer's stock. We find that each of these variables is correlated with sop...

Yes. We construct a measure of aggregate technology change, controlling for aggregation effects, varying utilization of capital and labor, nonconstant returns, and imperfect competition. On impact, when technology improves, input use and nonresidential investment fall sharply. Output changes little. With a lag of several years, inputs and investmen...

This is an entry for The New Palgrave Dictionary of Economics, 2nd Ed.

We show that simple "New Keynesian" models with capital but without investment frictions have counterfactual predictions regarding the short-run effects of fiscal policy shocks: fiscal expansions lower output, employment, and the real interest rate in these models. We modify the model by assuming that investment projects are costly to start or stop...

Abstract A mathematical and graphical treatment of the Q-theory extension of the Basic Real Business Cycle model of Prescott indicates that several key re- sults are robust to both investment adjustment costs and to variation in the shape of the utility function and the production function while other custom- ary results are fragile. It also demons...

Economists working with numerical solutions to the optimal consumption/saving problem under uncertainty have long known that there are quantitatively important interactions between liquidity constraints and precautionary saving behavior. This paper provides the analytical basis for those interactions. First, we explain why the introduction of a liq...

Economists working with numerical solutions to the optimal consumption/saving problem under uncertainty have long known that there are quantitatively important interactions between liquidity constraints and precautionary saving behavior. This paper provides the analytical basis for those interactions. First, we explain why the introduction of a liq...

: The half-life of deviations from purchasing power parity (PPP) plays a central role in the ongoing debate about the ability of macroeconomic models to account for the time series behavior of the real exchange rate. The main contribution of this paper is a general framework in which alternative priors for the half-life of deviations from PPP can b...

This article analyzes the effect of labor income risk on the joint saving/portfolio-composition problem. Given decreasing absolute prudence, we find that even when labor income risk increases overall saving, it tends to lower investment in a risky asset. Applying the theory to public finance, we argue that realistic increases to marginal tax rates...

In this paper, we derive and estimate relationships governing variable utilization of capital and labor for a firm solving a dynamic cost-minimization problem. Our method allows for (i) imperfect competition, (ii) increasing returns to scale, (iii) unobserved changes in utilization, (iv) unobserved changes in technology, (v) unobserved fluctuations...

It is well known that the implicit insurance provided by labor income taxes can reduce total saving. We show that this insurance can change the composition of saving as well, because the reduction in labor-income risk may affect the amount of financial risk that an individual chooses to bear. Given plausible restrictions on preferences, any change...

Zeldes (1989), Carroll (1992,1993), and others have shown that optimal consumption behavior for consumers facing income uncertainty can be remarkably different from the certainty-equivalent case. Carroll (1992) observes that many of the differences can be attributed to the concavity of the consumption function under uncertainty, but he does not des...

Second-order stochastic dominance answers the question “Under what conditions will all risk-averse agents prefer \(\tilde{x}_2\) to \(\tilde{x}_1\)?” Consider the following related question: “Under what conditions will all risk-averse agents who prefer lottery \(\tilde{x}_1\) to a reference lottery \(\tilde{\omega }\) also prefer lottery \(\tilde{x...

This paper constructs a dynamic macroeconomic model with less-than-perfect price flexibility which has a classical side consistent with real business cycle theory, augmented by investment adjustment costs; increasing returns to scale; and a new, flexible formalization of imperfect competition. Something akin to the classical dichotomy is justified...

Households have experienced an expansion of financial opportunities over the past several decades. Expanded financial opportunities, such as the democratization of credit and new lending approaches, can yield benefits in terms of household economic security. However, the financial crisis that began in 2007 has powerfully illustrated that expanded f...

Efficiency wage models of the effort elicitation type have important implications for labor market dynamics. These models have a wide array of discontinuous sunspot equilibria driven by extraneous variables, in addition to well-behaved equilibria characterized by continuous, slowly adjusting patterns of employment. Many aspects of actual labor mark...

This paper calculates indices of central bank autonomy (CBA) for 163 central banks as of end-2003, and comparable indices for a subgroup of 68 central banks as of the end of the 1980s. The results confirm strong improvements in both economic and political CBA over the past couple of decades, although more progress is needed to boost political auton...

This paper introduces the concept of standard risk aversion. A von Neumann-Morgenstern utility function has standard risk aversion if every risk that has a negative interaction with a small reduction in wealth also has a negative interaction with any undesirable, independent risk. It is shown that, given monotonicity and concavity, the combination...

For both discrete and continuous time this paper derives the Taylor approximation to the effect of uncertainty (in the simple sense of risk, not Knightian uncertainty) on expected utility and optimal behaviour in stochastic control models when the uncertainty is small enough that one can focus on only the first term that involves uncertainty. There...

This paper addresses the question of whether uninsurable background risk will lead people to buy more insurance against other risks that are insurable. The conditions of decreasing absolute risk aversion and decreasing absolute prudence on the utility function and either statistical independence or a general condition indicating a positive relation...

At least three types of precautionary motives are directly relevant to an agent's demand for assets. (I.) The precautionary saving motive, or prudence, can cause an agent to respond to a risk by accumulating more wealth. (II.) The desire to moderate total exposure to risk, or temperance, can cause an agent to respond to an unavoidable risk by reduc...

The marginal propensity to consume out of wealth is important for evaluating the effects of taxation on consumption, assessing the possibility of multiple equilibria due to aggregate demand spillovers, and explaining observed variations in consumption. It is also a component of the interest elasticity of consumption and the risk aversion of the val...

The theory of precautionary saving is shown to be isomorphic to the Arrow-Pratt theory of risk aversion, making possible the application of a large body of knowledge about risk aversion to precautionary saving--and more generally, to the theory of optimal choice under risk. In particular, a measure of the strength of the precautionary saving motive...

This paper addresses how to give optimal advice about monetary policy when it is known that the advice may not be heeded. The authors examine a simple macroeconomic model in which monetary policy has the ability to stabilize output by offsetting exogenous shocks to aggregate demand. The optimal policy rule for such a model is easily derived, but an...

Under plausible conditions on the shape of a monopolist's or a monopolistic competitor's cost function, multiplicative demand uncertainty is shown to raise the firm's optimal precommitted price. It is argued that this effect can be substantial.

This paper analyzes the effects of government debt and income taxes on consumption and saving in a world of infinitely-lived households having uncertain and heterogeneous incomes. The special structure of the model allows exact aggregation across households despite incomplete markets. The effects of government debt are shown to be substantial, roug...

Recursive dependence of altruistic utility on the utility of both children and parents is analyzed. Given reasonable restrictions on the extent of altruism, it is shown that in the static steady state of a simple overlapping generations model there will be some interval around the Golden Rule in which the economy responds to marginal changes just a...

Factor hoarding is widely recognized as a crucial feature of eco-nomic fluctuations and its importance in business cycle models has grown in recent years. Yet, very little is known about the cyclical be-havior of work effort. By resorting to high-quality firm-level data, we obtain an estimate of labor effort from a dynamic cost minimization model....

We derive a measure of technological change from a dynamic cost minimization model that controls for imperfect competition, increas-ing returns and unobserved factor utilization. We estimate this mea-sure using highly detailed panel data of a representative sample of Italian manufacturing firms in the period 1984-1997. Our key find-ing is that tech...

Over the last centuries there has been a dramatic world-wide increase in real out-put. In particular, US data shows that since 1960 aggregate consumption has roughly doubled while the average number of work-hours per person has stayed more or less constant. In spite of large secular increases in the real wage and consumption, contrary to what is ex...

In this document I will try to back up the claim that multiplicative (Hicks-neutral) technology shocks to the production of nondurable consumption goods have very little effect on a perfectly competitive economy (more precisely, any economy that can be represented as solving a social planner's problem) beyond the direct effect of increasing the qua...