Nicholas W. Papageorge

Who Believes in Me? The Effect of Student-Teacher Demographic Match on Teacher Expectations

Teachers are an important source of information for traditionally disadvantaged students. However, little is known about how teachers form expectations and whether they are systematically biased. We investigate whether student-teacher demographic mismatch affects high school teachers’ expectations for students’ educational attainment. Using a student fixed effects strategy that exploits expectations data from two teachers per student, we find that non-black teachers of black students have significantly lower expectations than do black teachers. These effects are larger for black male students and math teachers. Our findings add to a growing literature on the role of limited information in perpetuating educational attainment gaps.

The Right Stuff? Personality and Entrepreneurship

A puzzling feature of entrepreneurship is that many individuals are self-employed even though they would earn more in paid employment. To shed light on this puzzle, we examine the role of personality traits in determining entrepreneurial decisions and earnings. We estimate a model in which agents maximize expected utility by choosing between self and paid employment. We allow personality traits to affect earnings in each sector along with underlying preferences over sectors. We find that the personality traits that make entrepreneurship profitable are not always the same personality traits that drive people to open their own business. This means that, in terms of personality traits, individuals who would be the highest earning entrepreneurs are not always the individuals who choose to be entrepreneurs. We go on to use the estimated model to assess various policies designed to encourage entrepreneurship. In general, we find that these policies either subsidize businesses that would have been started without a subsidy or that they attract individuals with personality traits associated with preferences for entrepreneurship, but who have low-quality business ideas.

ENTERTAINING MALTHUS: BREAD, CIRCUSES, AND ECONOMIC GROWTH

Motivated by the basic adage that man does not live by bread alone, we offer a theory of historical economic growth and population dynamics where human beings need food to survive, but enjoy other things, too. Our model imposes a Malthusian constraint on food, but introduces a second good to the analysis that affects living standards without affecting population growth. We show that technological change does a good job explaining historical consumption patterns and population dynamics, including the Neolithic Revolution, the Industrial Revolution, and the Great Divergence. Our theory stands in contrast to models that assume a single composite good and a Malthusian constraint. These models generate negligible growth prior to the Industrial Revolution. However, recent revisions to historical data show that historical living standards—though obviously much lower than todays—varied over time and space much more than previously thought. These revisions include updates to Maddisons dataset, which served as the basis for many papers taking long‐run stagnation as a point of departure. This new evidence suggests that the assumption of long‐run stagnation is problematic. Our model shows that when we give theoretical accounting of these new observations the Industrial Revolution is much less puzzling. (JEL B10, I31, J1, N1, O30)

Why medical innovation is valuable: Health, human capital, and the labor market

I develop a dynamic framework to assess the value of pharmaceutical innovation, taking explicit account of how side effects and the labor market affect the demand for medical treatment. In the framework, forward‐looking patients do not simply maximize underlying health or longevity. Rather, they choose labor supply and medicine in light of potential side effects in an effort to jointly manage two forms of human capital: their health and their work experience. I use the framework to examine the treatment and employment decisions of human immunodeficiency virus (HIV) positive men before and after a medical breakthrough known as highly active anti‐retroviral treatment. A novelty of this application is my use of data containing both objective health measures along with reports of physical ailments. This allows me to model each HIV drug along two dimensions of quality—effectiveness and side effects. Using the framework, I am able to identify the impact of side effects on demand and show that counterfactual innovations that reduce side effects can be very valuable. I also show that when no treatment dominates along both dimensions of drug quality, patients exhibit health‐state‐dependent cyclicality in their medical treatment decisions, favoring effective treatments despite side effects when in poor health, but switching to less effective drugs with fewer side effects (or avoiding treatment altogether) when their health improves. Innovation health human capital labor structural models HIV/ AIDS I10 J24 O31

We Should Totally Open a Restaurant: How Optimism and Overconfidence Affect Beliefs

In many decision-making contexts, including whether to open a business, individuals may make poor choices since they over-estimate the probability of outcomes they prefer. An intervention aimed at transmitting information could therefore be very valuable. We design an experiment that distinguishes between two patterns in beliefs that lead to over-estimation of high payoff outcomes. The first is performance over-estimation, whereby the individual believes his performance is better than it actually is. The second is optimism, whereby, irrespective of his performance, the individual overweights the probability of exogenously determined events that he prefers. We also show that these two belief patterns are positively correlated at the individual level. Having isolated these patterns in beliefs, we go on to examine beliefs in a combined setting, meant to mimic more realistic decision-making context, where individuals simultaneously face performance uncertainty and preferences over outcomes. We show to what extent beliefs in this combined setting can be attributed to performance over-estimation or optimism. This decomposition reveals a striking gender difference: male over-estimation of high payoff outcomes is mostly driven by performance over-estimation. For females, over-estimation of high payoff outcomes is mostly attributable to optimism.Wishful thinking, defined as the tendency to over-estimate the probability of high-payoff outcomes, is a widely-documented phenomenon that can affect decision-making across numerous domains, including finance, management, and entrepreneurship. We design an experiment to distinguish and test the relationship between two easily-confounded biases, optimism and overconfidence, both of which can contribute to wishful thinking. We find that optimism and overconfidence are positively correlated at the individual level and that both help to explain wishful thinking. These findings suggest that ignoring optimism results in an upwardly biased estimate of the role of overconfidence in explaining wishful thinking. To illustrate this point, we show that 30% of our observations are misclassified as under- or overconfident if optimism is omitted from the analysis. Our findings have potential implications for the design of information interventions since how agents incorporate information depends on whether the bias is ego-related.

The Economic Value of Breaking Bad: Misbehavior, Schooling and the Labor Market

Prevailing research argues that childhood misbehavior in the classroom is bad for schooling and, presumably, bad for adult outcomes. In contrast, we argue that childhood misbehavior represents some underlying non-cognitive skills that are valuable in the labor market. We follow work from psychology and categorize observed classroom misbehavior into two underlying latent factors. We then estimate a model of educational attainment and earnings outcomes, allowing the impact of each of the two factors to vary by outcome. We find one of the factors, labeled in the psychological literature as externalizing behavior (and linked, for example, to aggression), reduces educational attainment yet increases earnings. Unlike most models where non-cognitive skills that increase human capital through education also increase labor market skills, our findings illustrate how some non-cognitive skills can be productive in some economic contexts and counter-productive in others. Policies designed to promote human capital accumulation could therefore have mixed effects or even negative economic consequences, especially for policies that target non-cognitive skill formation for children or adolescents which are aimed solely at improving educational outcomes.