Steven D. Levitt's research while affiliated with University of Chicago and other places

Publications (137)

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Donohue and Levitt (2001) presented evidence that the legalization of abortion in the early 1970s played an important role in the crime drop of the 1990s. That paper concluded with a strong out-of-sample prediction regarding the next two decades: “When a steady state is reached roughly twenty years from now, the impact of abortion will be roughly t...
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Little is known about whether people make good choices when facing important decisions. This article reports on a large-scale randomized field experiment in which research subjects having difficulty making a decision flipped a coin to help determine their choice. For important decisions (e.g. quitting a job or ending a relationship), individuals wh...
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We develop a simple algorithm for detecting exam cheating between students who copy off one another's exams. When this algorithm is applied to exams in a general science course at a top university, we find strong evidence of cheating by at least 10% of the students. Students studying together cannot explain our findings. Matching incorrect answers...
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We make use of data from a Facebook application where hundreds of thousands of people played a simultaneous move, zero-sum game—rock-paper-scissors—with varying information to analyze whether play in strategic settings is consistent with extant theories. We report three main insights. First, we observe that most people employ strategies consistent...
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We explore the power of behavioral economics to influence the level of effort exerted by students in a low stakes testing environment. We find a substantial impact on test scores from incentives when the rewards are delivered immediately. There is suggestive evidence that rewards framed as losses outperform those framed as gains. Nonfinancial incen...
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We report on a natural field experiment on quantity discounts involving more than 14 million consumers. Implementing price reductions ranging from 9-70% for large purchases, we found remarkably little impact on revenue, either positively or negatively. There was virtually no increase in the quantity of customers making a purchase; all the observed...
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Profit maximizing behavior on the part of firms is a fundamental, but rarely tested, assumption of economics. In this paper, I analyze the decisions made by an MIT trained economist running a company that delivers bagels and donuts. The simplicity and transparency of the business (e.g. marginal cost is easily observed) allow for relatively direct t...
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This paper reviews the field experimental evidence on firm–employee relationships. There is strong evidence that output rises in response to financial incentives, but more mixed support for worker reciprocity in response to employer generosity. Non-financial approaches, such as worker recognition or adding ‘meaning’ to mundane tasks, can also incre...
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Hurricane Katrina destroyed more than 200,000 homes and led to massive economic and physical dislocation. Using a panel of tax return data, we provide one of the first comprehensive analyses of the hurricane's long-term economic impact on its victims. Katrina had large and persistent impacts on where people live; small and mostly transitory impacts...
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Numerous social indicators turned negative for Blacks in the 1980s and rebounded a decade later. We explore whether crack cocaine explains these patterns. Absent a direct measure, we construct a crack prevalence index using multiple proxies. Our index reproduces spatial and temporal patterns described in ethnographic accounts of the crack epidemic....
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In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA), prohibiting the knowing receipt of funds for the purpose of unlawful gambling. The principal consequence of the UIGEA was the shutdown of the burgeoning online poker industry in the United States. Courts determine whether a game is prohibited gambling by asking whether...
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The fight against terrorism requires identifying potential terrorists before they have the opportunity to act. In this paper, we investigate the extent to which retail banking data - which as far as we know are not currently used by anti-terror intelligence agencies in any systematic manner - are a useful tool in identifying terrorists. Using detai...
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Domestic attempts to use financial incentives for teachers to increase student achievement have been ineffective. In this paper, we demonstrate that exploiting the power of loss aversion—teachers are paid in advance and asked to give back the money if their students do not improve sufficiently—increases math test scores between 0.201 (0.076) and 0....
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A long line of research on behavioral economics has established the importance of factors that are typically absent from the standard economic framework: reference dependent preferences, hyperbolic preferences, and the value placed on non-financial rewards. To date, these insights have had little impact on the way the educational system operates. T...
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Productivity improvements within establishments (e.g., factories, mines, or retail stores) are an important source of aggregate productivity growth. Past research has documented that learning by doing–productivity improvements that occur in concert with production increases–is one source of such improvements. Yet little is known about the specific...
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Extremely preliminary and incomplete. Comments appreciated. Please do not cite without prior permission of the authors. We are grateful to John Easton, Joseph Hahn, Jack Harnedy, Frank Spoto and John Quane for assistance in collecting the data, and to Patrick Walsh for excellent research assistance. We are especially grateful to Jack Harnedy and Jo...
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Each year, more than 250 students in the Chicago Public Schools (CPS) are shot. The authors of this paper worked with the leadership of CPS to build a predictive model of shootings that helped determine which students would be included in a highly targeted and resource intensive mentorship program. This paper describes our predictive model and offe...
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In determining the legality of online poker – a multibillion dollar industry – courts have relied heavily on the issue of whether or not poker is a game of skill. Using newly available data, we analyze that question by examining the performance in the 2010 World Series of Poker of a group of poker players identified as being highly skilled prior to...
Article
Productivity improvements within establishments (e.g., factories, mines, or retail stores) are an important source of aggregate productivity growth. Past research has documented that learning by doing—productivity improvements that occur in concert with production increases—is one source of such improvements. Yet little is known about the specific...
Article
Empirical estimates of peer effects vary widely in the literature. To better understand the conflicting evidence, we develop a price theory of social interactions in which peer group mem-bership is dictated by comparative advantage. Two key results emerge from the model. First, when comparative advantage is the guiding principle of peer group organ...
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In the 1960s Blacks and Whites chose relatively similar first names for their children. Over a short period of time in the early 1970s, that pattern changed dramatically with most Blacks (particularly those living in racially isolated neighborhoods) adopting increasingly distinctive names, but a subset of Blacks actually moving toward more assimila...
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The minimax argument represents game theory in its most elegant form: simple but with stark predictions. Although some of these predictions have been met with reasonable success in the field, experimental data have generally not provided results close to the theoretical predictions. In a striking study, Palacios-Huerta and Volij (2008) presented ev...
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We document and analyze the emergence of a substantial gender gap in mathematics in the early years of schooling using a large, recent, and nationally representative panel of US children. There are no mean differences between boys and girls upon entry to school, but girls lose more than two-tenths of a standard deviation relative to boys over the f...
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Full-text available
The minimax argument represents game theory in its most elegant form: simple but with stark predictions. Although some of these predictions have been met with reasonable success in the field, experimental data have generally not provided results close to the theoretical predictions. In a striking study, Palacios-Huerta and Volij ( 2008) presented e...
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Agricultural economics that has played a prime role in economics for a long time is losing its importance more recently. The future of field experimental methods can be importantly engineered by agricultural and resource economists. The field experimenter does not exert the same degree of control over real markets as the scientist does in the lab....
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After 41 consecutive years of increase, out-of-wedlock teen childbearing unexpectedly reversed course in 1991 and by 2002 was 20% below its peak. Explanations for that reversal have proven elusive. In this paper, we present evidence that exposure to legalized abortion in utero for the cohort of women that became teenagers in the 1990s is one factor...
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This study presents an overview of modern field experiments and their usage in economics. Our discussion focuses on three distinct periods of field experimentation that have influenced the economics literature. The first might well be thought of as the dawn of "field" experimentation: the work of Neyman and Fisher, who laid the experimental foundat...
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Parker and Van Praag (2009) showed, based on theory, that the group status of the profession ‘entrepreneurship’ shapes people’s occupational preferences and thus their choice behavior. The current study focuses on the determinants and consequences of the group status of a profession, entrepreneurship in particular. If the group status of entreprene...
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I modify the uniform-price auction rules in allowing the seller to ration bidders. This allows me to provide a strategic foundation for underpricing when the seller has an interest in ownership dispersion. Moreover, many of the so-called "collusive-seeming" equilibria disappear.
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We expand the set of outcomes considered by the tournament literature to include draws and use games from post-war chess tournaments to see whether strategic behavior can be important in such scenarios. In particular, we examine whether players from the former Soviet Union acted as a cartel in international all-play-all tournaments - intentionally...
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Economic models can benefit from incorporating insights from psychology, but behavior in the lab might be a poor guide to real-world behavior.
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In stark contrast to other agency-based consumer service industries, real estate agents have been remarkably effective at maintaining margins and market share. One possible explanation for the success of real estate agents is collusion, and consequently the industry is facing regulator scrutiny. In this paper we first consider the mechanisms throug...
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Agents are often better informed than the clients who hire them and may exploit this informational advantage. Real estate agents have an incentive to convince clients to sell their houses too cheaply and too quickly. We test these predictions by comparing home sales in which real estate agents are hired to when an agent sells his own home. Consiste...
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Over the past thirty years, the use of child safety seats in motor vehicles has increased dramatically. There is, however, relatively little empirical evidence regarding the efficacy of child safety seats relative to the much cheaper alternative of traditional seat belts. Using data on all fatal crashes in the United States from 1975 to 2003, I fin...
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We are grateful to Foote and Goetz for noting that the final table of Donohue and Levitt (Quarterly Journal of Economics, 116 (2001), 379–420) inadvertently omitted state-year interactions. Correcting our mistake does not alter the sign or statistical significance of our estimates, although it does reduce their magnitude. Using a more carefully con...
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Over the past 40 years the fraction of mixed race black-white births has increased nearly nine-fold. There is little empirical evidence on how these children fare relative to their single-race counterparts. This paper describes basic facts about the plight of mixed race individuals during their adolescence and early adulthood. As one might expect,...
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Empirical economic analyses of deterrence attempt to test the central prediction of Becker’s (1968) rational-actor model of criminal behaviour: that less crime occurs when the expected penalties are greater. When economists have broken the simultaneity of crime rates and crime-control policies, they have generally concluded that policing levels and...
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This chapter reviews empirical studies of criminal punishment and the criminal justice system by economists. Since the modern exposition of the economic model of criminal behavior, empirical economists have tested its predictions using variation in expected criminal punishments. In the past decade, empirical economists have made substantial progres...
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A critical question facing experimental economists is whether behavior inside the laboratory is a good indicator of behavior outside the laboratory. To address that question, we build a model in which the choices that individuals make depend not just on financial implications, but also on the nature and extent of scrutiny by others, the particular...
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I examine the behavioral response to new birth-control methods by exploiting inter-state variation in the introduction of the birth-control pill and abortion. Since sexual behavior is hard to observe directly, I use incidence of sexually transmitted diseases as a proxy for risky sexual behavior. I find that STD incidence rose after the legalization...
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We can think of no question more fundamental to experimental economics than understanding whether, and under what circumstances, laboratory results generalize to naturally occurring environments. In this paper, we extend Levitt and List (2006) to the class of games in which financial payoffs and 'doing the right thing' are not necessarily in confli...
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Trading data from the gambling market for the 2002 World Cup provide a unique window through which to test theories of market efficiency. This market provides many of the benefits of a laboratory experiment, but with much higher stakes, experienced participants, and a naturally-occurring environment. The primary drawback of the data is the relative...
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In this article, we analyze the 1920s Ku Klux Klan, those who joined it, and its social and political impact by combining a wide range of archival data sources with data from the 1920 and 1930 U.S censuses. We find that individuals who joined the Klan in some cities were more educated and more likely to hold professional jobs than the typical Ameri...
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The past decade has seen a sharp increase in the application of empirical economic approaches to the study of crime and the criminal justice system. Much of this research has emphasized identifying causal impacts, as opposed to correlations. These studies have generally found that increases in police and greater incarceration lead to reduced crime....
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Young children are required to use child safety seats, and the age threshold at which children can legally graduate to seat belts has steadily increased. This paper tests the relative effectiveness of child safety seats, lap-and-shoulder seat belts, and lap belts in preventing injuries among motor vehicle passengers aged 2-6. We analyze three large...
Article
Profit maximizing behavior on the part of firms is a fundamental, but rarely tested, assumption of economics. In this paper, I analyze the decisions made by an MIT trained economist running a company that delivers bagels and donuts. The simplicity and transparency of the business (e.g. marginal cost is easily observed) allow for direct tests of pro...
Article
On tests of intelligence, Blacks systematically score worse than Whites, whereas Asians frequently outperform Whites. Some have argued that genetic differences across races account for the gap. Using a newly available nationally representative data set that includes a test of mental function for children aged eight to twelve months, we find only mi...
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Donohue and Levitt (2001) argue that the legalization of abortion in the United States in the 1970s played an important role in explaining the observed decline in crime approximately two decades later. Foote and Goetz (2005) challenge the results presented in one of the tables in that original paper. In this reply, we regretfully acknowledge the om...
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This article describes basic facts regarding the Black-White test score gap over the first four years of school. Black children enter school substantially behind their White counterparts in reading and math, but including a small number of covariates erases the gap. Over the first four years of school, however, Blacks lose substantial ground relati...
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School choice has become an increasingly prominent strategy for enhancing academic achievement. To evaluate the impact on participants, we exploit randomized lotteries that determine high school admission in the Chicago Public Schools. Compared to those students who lose lotteries, students who win attend high schools that are better in a number of...
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En este artículo pretendo establecer las verdaderas razones del por qué de la baja en la criminalidad en los Estados Unidos durante la década de 1990. Comienzo con una revisión de los hechos y después analizo las principales explicaciones del por qué de la baja, fijándome en posibles determinantes que hayan cambiado de manera sustancial en los años...
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A wide range of social indicators turned sharply negative for Blacks in the late 1980s and began to rebound roughly a decade later. We explore whether the rise and fall of crack cocaine can explain these patterns. Absent a direct measure of crack cocaine%u2019s prevalence, we construct an index based on a range of indirect proxies (cocaine arrests,...
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We explore the impact of school choice on student outcomes in the context of open enrollment within the Chicago Public Schools (CPS). Roughly half of the students opt out of their assigned high school to attend a different CPS school, and these students are much more likely than those who remain in their assigned schools to graduate. To determine t...
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Full-text available
An important question facing experimental economists is whether behavior inside the laboratory is a good indicator of behavior outside the laboratory. We begin with a model that assumes the choices that individuals make depend not just on financial implications, but also on the nature and extent of scrutiny by others, the particular context in whic...
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Contestant voting behavior on the television game show Weakest Link provides an unusual opportunity to distinguish between taste-based and information-based theories of discrimination. In early rounds, strategic incentives encourage voting for the weakest competitors. In later rounds, the incentives reverse and the strongest competitors become the...
Article
In the 1960s Blacks and Whites chose relatively similar first names for their children. Over a short period of time in the early 1970s, that pattern changed dramatically with most Blacks (particularly those living in racially isolated neighborhoods) adopting increasingly distinctive names, but a subset of Blacks actually moving toward more assimila...
Article
The market for sports gambling is structured very differently from the typical financial market. In sports betting, bookmakers announce a price, after which adjustments are small and infrequent. Bookmakers do not play the traditional role of market makers matching buyers and sellers but, rather, take large positions with respect to the outcome of g...
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In previous research, a substantial gap in test scores between white and black students persists, even after controlling for a wide range of observable characteristics. Using a newly available data set (the Early Childhood Longitudinal Study), we demonstrate that in stark contrast to earlier studies, the black-white test score gap among incoming ki...
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Crime dropped sharply and unexpectedly in the United States in the 1990s. I conclude that four factors collectively explain the entire drop in crime: increases in the number of police, increases in the size of the prison population, the waning of the crack epidemic, and the legalization of abortion in the 1970s. Other common explanations for declin...
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This article describes the results of a three-year investigation into cheating by school personnel. The goals of this research were to measure the prevalence of cheating by teachers and administrators and to analyze the factors that predict cheating. Using data on test scores and student records from the Chicago Public Schools, the authors develope...
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Donohue and Levitt (2001) suggest there is a causal link between legal- ized abortion and reductions in crime almost two decades later when the cohorts exposed to legalized abortion reach their peak crime years. Joyce (2003) examines crime committed in the period 1985- 90 for the cohorts born immediately before and after abortion legalization. He é...
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School choice has become an increasingly prominent strategy for urban school districts seeking to enhance academic achievement. Evaluating the impact of such programs is complicated by the fact that a highly select sample of students takes advantage of these programs. To overcome this difficulty, we exploit randomized lotteries that determine high...
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The market for sports gambling is structured very differently than the typical financial market.
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Donohue and Levitt (2001) present a number of analyses that suggest a causal link between legalized abortion and reductions in crime almost two decades later when the cohorts exposed to legalized abortion reach their peak crime years. Joyce (2003) challenges that finding. In this paper, we demonstrate that Joyce's failure to uncover a negative rela...
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The market for sports gambling is structured very differently than the typical financial market. In sports betting, bookmakers announce a price, after which adjustments are small and infrequent. As a consequence, bookmakers do not play the traditional role of market makers whose primary function is to match buyers and sellers, but rather, take larg...
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MacCoun and Reuter's primary goal is to understand how current U.S. drug policies can be improved. They carefully describe the facts and trends regarding drug usage, criminal justice enforcement, and the harms associated with drug use, then discuss the public debate surrounding drug prohibition and give an informal treatment of the theory underlyin...
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Most economists would concur that an important role of economic theory is to influence the direction of empirical research, either by posing new questions or by suggesting new answers to old questions. Whether or not modem theory should be judged to be a success on that metric is a frequently debated question, but one on which there has been little...
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Previous research has attempted to identify a deterrent effect of capital punishment. We argue that the quality of life in prison is likely to have a greater impact on criminal behavior than the death penalty. Using state-level panel data covering the period 1950--90, we demonstrate that the death rate among prisoners (the best available proxy for...
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We develop an algorithm for detecting teacher cheating that combines information on unexpected test score fluctuations and suspicious patterns of answers for students in a classroom. Using data from the Chicago public schools, we estimate that serious cases of teacher or administrator cheating on standardized tests occur in a minimum of 4-5 percent...
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Brookings-Wharton Papers on Urban Affairs 2003 (2003) 185-220 EDUCATIONAL REFORM is a critical issue in urban areas. Most large urban school districts in the United States suffer from low test scores, high dropout rates, and frequent teacher turnover. Poor performance of city schools induces flight to the suburbs by affluent families with children,...
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paper it was difé cult to draw strong conclusions of the impact of police on crime because of the imprecision of the estimates. McCrary' s new evidence rightly points out that even greater caution is warranted when interpreting the pooled regressions. If electoral cycles can provide no more than suggestive evidence of a causal impact of police on c...
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During the 1998-99 season, the National Hockey League randomly varied the number of referees used across games, seemingly providing a rare opportunity to test directly the deterrence model. Combining experimental parameter estimates with an economic model, there is little evidence that the rate of offending changed substantially with the addition o...
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Although the theoretical literature on corruption is well developed, empirical work in this area has lagged because it has proven difficult to isolate corrupt behavior in the data. In this paper, we look for evidence of corruption in an unlikely place: the highest echelons of Japanese sumo wrestling. This paper provides strong statistical evidence...
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The concept of mixed strategy is a fundamen- tal component of game theory, and its norma- tive importance is undisputed. However, its empirical relevance has sometimes been viewed with skepticism. The main concern over the practical usefulness of mixed strategies relates to the " indifference" property of a mixed- strategy equilibrium. In order to...
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We develop an algorithm for detecting teacher cheating that combines information on unexpected test score fluctuations and suspicious patterns of answers for students in a classroom. Using data from the Chicago Public Schools, we estimate that serious cases of teacher or administrator cheating on standardized tests occur in a minimum of 4-5 percent...
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National-level time series data are a crude tool for distinguishing between two alternative behavioral explanations for a link between unemployment and crime. Consequently, inferences drawn from aggregate time series estimates are likely to be misleading. A more fruitful approach to learning about the link between unemployment and crime would be to...
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The number of prisoners incarcerated on drug-related offenses rose 15-fold between 1980 and 2000. This paper provides the first systematic empirical analysis of the implications of that dramatic shift in public policy. We estimate that cocaine prices are 5–15% higher today as a consequence of increases in drug punishment since 1985, presumably lead...
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We offer evidence that legalized abortion has contributed significantly to recent crime reductions. Crime began to fall roughly eighteen years after abortion legalization. The five states that allowed abortion in 1970 experienced declines earlier than the rest of the nation, which legalized in 1973 with Roe v. Wade. States with high abortion rates...
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Because data are collected for only fatal crashes, it is difficult to accurately measure seat belt and air bag effectiveness. The use of safety devices influences survival rates which in turn determine whether a crash is included in the sample, leading to sample selection bias. We propose a simple solution to the selection problem: limiting the sam...
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We present a methodology for measuring the risks posed by drinking drivers that relies solely on readily available data on fatal crashes. The key to our identification strategy is a hidden richness inherent in two-car crashes. Drivers with alcohol in their blood are seven times more likely to cause a fatal crash; legally drunk drivers pose a risk 1...
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Race has long been recognized as playing a critical role in policing. In spite of this awareness, there has been little previous research that attempts to quantitatively analyze the impact of officer race on tangible outcomes. In this paper, we examine the relationship between the racial composition of a city's police force and the racial patterns...
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We offer evidence that legalized abortion has contributed significantly to recent crime reductions. Crime began to fall roughly eighteen years after abortion legalization. The five states that allowed abortion in 1970 experienced declines earlier than the rest of the nation, which legalized in 1973 with Roe v. Wade. States with high abortion rates...
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Current education reform proposals involve improving educational outcomes through forms of market-based competition and expanded parental choice. In this paper, we explore the impact of choice through open enrollment within the Chicago Public Schools (CPS). Roughly half of the students within CPS opt out of their assigned high school to attend othe...
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After 1987, in pool halls and city parks, high school football games, storefront churches, youth centers, and other sites where police presence was minimal, high-ranking leaders from Chicago’s largest AfricanAmerican street gang ‘‘Nations’’ began meeting to discuss the latest period of change in their respective associations. Adorned in jewelry and...
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We use a unique data set detailing the financial activities of a drug-selling street gang to analyze gang economics. On average, earnings in the gang are somewhat above the legitimate labor market alternative. The enormous risks of drug selling, however, more than offset this small wage premium. Compensation within the gang is highly skewed, and th...
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Changes in the age structure are shown to have a limited impact on aggregate crime rates. Even the dramatic transformation of the age distribution accompanying the baby boom shifted crime rates by no more than 1 % per year. Projected changes in the age distribution between 1995 and 2010 will lead to slight declines in per capita crime rates. These...
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States that were represented by very senior Democratic congressmen grew more quickly during the 1953-90 period than states that were represented by more junior congressional delegations. States with a large fraction of politically competitive House districts also grew faster than average. The first finding is consistent with traditional legislator-...