Collaborative Research: Labor Market and Public Policy Preferences

Trustees Of Boston University, Boston

Investigators

Abstract

What people want (preferences) is central to economic analysis and policy formulation. Yet there is no easy or generally acceptable way of measuring preferences from data. The proposed research develops a portable, scalable, and easy to measure preference revelation (elicitation) method called the Bayesian Adaptive Choice Experiment (BACE). BACE improves upon existing preference elicitation approaches that are used in policy analysis, regulation, and litigation. The method will be applied to study important and policy-relevant questions: (i) preferences for job amenities such as workplace flexibility, and firm provision of such amenities---important considerations in the face of global technical and organizational changes. This is important as global technical and organizational changes have the potential to alter the structure of work as the costs of providing workplace amenities shift over time. (ii) in preferences for public policies, the research produces method of comparing the welfare benefits of various policies for different demographic groups. In addition to these applications, BACE shows the potential for a new generation of surveys and experimental methods to do much more in helping researchers and policymakers value non-market resources. The results of this research will contribute significantly to improve economic analyses as well as improve the quality of public policies and business decisions and thus increase economic growth. BACE provides an efficient dynamic elicitation procedure for conducting choice experiments. It does so by generating the information-maximizing sequence of choice scenarios based on a prior that gets updated with previous answers to obtain individual-level Bayesian posterior estimates. The procedure allows for a higher precision of the parameter estimates with fewer choice scenarios presented to each subject while also overcoming systematic biases in estimating average preference parameters from commonly used static approaches. Applying the method to preferences for job amenities, the resulting individual-level preference data makes it possible to estimate a new model of compensating differentials that extends the classic Rosen (1986) framework. Applying BACE to willingness to pay for public policies produces new evidence on the correlates of policy preferences and leads to novel estimates of the Marginal Value of Public Funds. The implementation of BACE in this research is a step forward in allowing such procedures to be widely adopted to measure important inputs for understanding a broad range of phenomena in social sciences. The results of this research will contribute significantly to improve economic analyses as well as improve the quality of public policies and business decisions and thus increase economic growth. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.