Study: What if you knew how much your boss makes?

A hand holds up a bundle of dollars while many other hands do the same in the background
Credit: RapidEye for iStock/Getty Images

More states are requiring employers to disclose information about their workers’ salaries with the hope it will reduce gender and racial pay gaps. But increasing pay transparency can also have some surprising impacts on worker productivity, according to a new large-scale study that is the first to examine how employees respond when they find out how much both their peers and bosses make.

The study, co-authored by Assoc. Prof. Ricardo Perez-Truglia, asked over 2,000 employees at a large commercial bank in Southeast Asia to guess their peers’ and managers’ salaries, then monitored their work habits after they were given the salary information. The main findings: Employees became less productive when they discovered their peers were making more money than they thought, but they worked harder when they discovered their bosses were earning more than they estimated.

“It was not uncommon for employees to find out that some of their bosses got paid three, four, five times as much as they do, sometimes 20 times as much,” said Perez-Truglia, whose study is forthcoming in the Journal of Political Economy. “What shocked us was that when you compared yourself to your peers, small pay differences demotivate you. But when you find out your bosses make an obscene amount more than you make, you don’t care. If anything, you become more productive.”

The productivity boost was strongest for manager positions that were just a few promotions away from an employee’s current job, but the effect faded when it came to high-level, unattainable positions. This suggests workers believe, “If I work hard and get promoted, I will get paid an obscene amount myself,” Perez-Truglia said.

He and co-author Zoë Cullen of Harvard Business School also found that employees were better at guessing peer pay than manager pay. Employees also wanted the company to release more salary information—as long as it wasn’t their own.

The researchers did not study pay disparities by race or gender, but said their evidence relates to the growing debate on pay transparency laws. “There is a widespread view that forcing firms to be more transparent would reduce pay inequality,” they wrote. “Our findings suggest that these policies may be effective, but in a narrow sense: While transparency may pressure firms to reduce horizontal inequality (between peers), employees are unlikely to exert the same pressure to reduce vertical inequality (between employees and managers), which constitutes the bulk of pay inequality.”

The experiment

The research was conducted at an unidentified Southeast Asian bank in 2017, when Cullen was working there as chief economist. The researchers asked employees to guess the average base salaries of their managers and peers. Then, they conducted an experiment: half of the subjects, selected at random, would get to see an estimate of how much their peers or managers actually get paid.

The researchers then measured the behavior of these employees for 90 days after they saw, or did not see, what others were making. They found that employees worked harder–spending more hours at work, sending more emails from their company account and making more sales—when they found out their managers earned more than they thought. But those who found out their peers made more than they had estimated slacked off.

For example, they estimated that a 10% increase in manager salary over what employees had guessed increased the average hours employees worked by 1.5%, while a 10% increase in peer salary over what employees had guessed reduced the hours they worked by 9.4%.

The end of the survey included questions related to employee morale, such as job and pay satisfaction, and attitudes toward pay inequality. “When we tell them their peers get paid more, they say inequality is an issue. But when we tell them their bosses get paid more, they say they don’t care,” Perez-Truglia said.

On average, employees underestimated their bosses’ salaries by about 14%, but when it came to their peers’ pay, about half guessed too high and half guessed too low.

Would companies benefit?

Finding out how much peers earn “would positively affect some people and negatively affect some people,” with the net result for the company being about zero. “They cancel each other out,” Perez-Truglia said. Disclosing manager pay, however, would have a small positive impact on productivity.

On balance, the researchers concluded that companies and their employees could benefit from greater pay transparency.

Their results are consistent with previous research that found employees become demotivated when they find out their peers make more than they do. A 2012 study of University of California employees by UC Berkeley economists David Card, Emmanuel Saez, and Enrico Moretti along with Alexandre Mas of Princeton University showed that employees who found out they were earning less than the median for their unit were less satisfied with their job and more likely to look for a new one, while above-median earners were unaffected.

This new study is the first to look at the impact on employees who discover their boss’ pay, Perez-Truglia said.

He and Cullen also found that employees were hungry for salary information, and many were willing to “pay” for it. In the experiment, some employees gave up a chance to win almost $200 to see their boss’ or peers’ salaries. Employees may feel they need pay information “to decide whether to work harder to get promoted, or to use it as a bargaining chip in future salary negotiations,” they wrote.

Separately, in response to two survey questions, 65% of the employees said they would like their company to disclose to all employees the same type of average pay data provided in the experiment. However, 75% opposed disclosing everyone’s exact salary. “One plausible interpretation,” the authors wrote, “is that while employees value the salary information a lot, they may value their privacy even more.”


‘A giant of a person’: Economist John Morgan dies at 53

Professor John Morgan, an economist who found elegant new ways to analyze the world through the lens of game theory, and whose popular classes and sage mentorship made a deep impression on his students, passed away Oct. 6 at age 53. He died peacefully at his Walnut Creek home.

Headshot of Professor John Morgan
Professor John Morgan

During his nearly two decades at Berkeley Haas, Morgan left his mark through his prolific and wide-ranging research, his unconventional teaching that drew on strategy games he invented, and his generous leadership. He had been struggling with a painful autoimmune disease that put him on medical leave, but he continued with his research and had planned to resume teaching in the spring.

“It’s impossible to over-express what a force John was in this school, and it didn’t take long for anyone who met him to realize that his small physical stature was a disguise for the giant of a person he was,” said Prof. Steve Tadelis, a close colleague in the Economic Analysis & Policy Group. “We have great researchers, we have great teachers, and we have people who give freely of themselves. But I cannot think of a single person who embodies all three of these at the extreme levels that John did.”

It’s impossible to over-express what a force John was in this school… —Prof. Steve Tadelis


Morgan was the Oliver E. and Dolores W. Williamson Chair of the Economics of Organizations; co-director of the Fisher Information Technology Center; founding director of the Experimental Social Sciences Laboratory (XLab); a member of the California Management Review editorial board; and faculty director and tireless advocate for Berkeley Executive Education. In 2013, he was the inaugural winner of the Williamson Award, given to faculty who embody the school’s four Defining Leadership Principles. He also won the Cheit Award for Excellence in Teaching in 2006.

Professor John Morgan writing on a whiteboard.
Morgan teaching at the whiteboard in 2011. (Photo: Jim Block)

Pennsylvania native

Born on November 11, 1967, in Wilkes-Barre, Pa., Morgan was raised in Ashley, Pa. He met his future wife, Heather Evans, when they were teenagers working at the Osterhout Free Library in Wilkes-Barre. They went to different high schools but both attended the University of Pennsylvania, where Morgan graduated summa cum laude in economics from the Wharton School in 1989. The couple was married in 1991, and celebrated their 30th anniversary in August.

Morgan earned a PhD in economics from Pennsylvania State University in 1996 and landed an assistant professorship in economics and public affairs at Princeton University. Following stints as a visiting professor at Penn and New York University, and a visiting fellow at Nuffield College, University of Oxford, he joined Berkeley Haas in 2002. During his career at Berkeley, he also spent time as a visiting fellow, Trinity College, and an eternal fellow, Judge Business School, both at the University of Cambridge, U.K.

His doctoral thesis was an early example of his elegant reasoning, colleagues said. “Financing Public Goods by Means of Lottery” showed why, despite their reputation as regressive, lotteries are a very effective method of raising funds for public benefit: Unlike taxes, they are voluntary, and those who are paying have the chance to get some of the benefit distributed back to them.

Academic derring-do

Among the areas Morgan delved into were pricing and competition in online markets, auctions, expertise, reputations, and voting. He looked at why prices can vary so widely on the internet when it’s so easy to shop around; showed that people aren’t very good at accounting for hidden fees like shipping costs; and even had a paper on the economics of psych-outs, or why showing off can make competitive sense, despite being frowned upon.

No matter the topic, Morgan had an exceptional ability to dispassionately analyze problems, colleagues said. And while his brilliance with economic models stood out, he also loved experimental work, co-founding the Haas Xlab to allow researchers to see if their theories held up in practice.

“I wished we could bottle John, and give every economist a dose of his clear thinking,” said Prof. David Levine, chair of the Economic Analysis & Policy Group, who had been working with Morgan to return to the classroom in the spring. “He thought about ethics. He took the perspectives of other people. He was smarter than me—in fact, he was smarter than just about everyone.”

According to Tadelis, Morgan’s “rate of publication was second to none” before his illness took a toll. Levine was among several colleagues who commented on Morgan’s academic derring-do, which stood out even at an elite institution. “Sometimes his brilliance was intimidating—for example, the time he had two different articles in the same issue of the preeminent economics journal, the American Economic Review,” Levine said.

Prof. Ernesto Dal Bó, a political economist, often discussed voting theories with Morgan. “I enjoyed a front-row seat as he wrote really clever models investigating the informational and welfare properties of important voting institutions,” Dal Bó said. “John’s mathematical models of voting often delivered surprise, and always delivered significant truth and beauty. He was a uniquely gifted researcher who made those around him think much harder, while cheering us up with his wit.”

Mentor and father figure

Those qualities also made an impression on the doctoral students who sought him out for his attentive mentorship and unique approach to life and work.

“Conversing with him was like being on an adventure. He would throw himself at intellectual challenges and follow them wherever they went, and he was willing to challenge convention and be controversial on certain topics.” said Bo Cowgill, PhD 15, now an assistant professor at Columbia University. “On top of that he was hilarious—he could bring down the house with his mixture of humor and insights and game theory and economics.”

He was devoted to his students, a number of whom became good friends and repeated co-authors after they graduated.

“He would generously give his time to PhD students. He put in the hard work to make them better—and they did quite well on the job market,” Cowgill said. “Yet he also cared about things outside of academic success and climbing the career ladder. He would encourage students to take time for their mental health and their lives outside of their careers. He was like a father figure, or a mentor for questions about life.”

Morgan sometimes offered his own money as prizes for students who won his strategy games.

“Survivor” at Haas

Morgan taught strategy, leadership, microeconomics and policy, and his long-running game theory class was one of the most popular at Haas. He blasted rock music to welcome students to class and energize them for competition in his signature strategy games, which he eventually incorporated into a semester-long game based on the reality TV show Survivor. He said his goal was to teach students to be “outward thinkers,” by which he meant they would need to be able to relate to others to succeed in business.

“You don’t really learn how to empathize by having some professor tell you about the need to empathize. It’s like reading a self-help book. It doesn’t work. You actually have to do it,” he said.

He received awards from the National Science Foundation, and was selected as a visiting scholar at the Hoover Institution and the International Monetary Fund. He consulted on auctions and dynamic pricing for Google, was a research scientist at Yahoo!, and served as a consultant to the Federal Trade Commission.

“We will dearly miss John’s sharp wit, brilliant intellect, and personal warmth,” said Dean Ann Harrison. “He was greatly beloved by colleagues and students alike.”

Devoted family man

John Morgan wearing a Red Sox shirt
Morgan was a passionate fan of the Boston Red Sox.

Yet Morgan had another side, as a grounded and devoted husband to Heather, an enthusiastic father to his son. He also pursued many non-academic interests. “John was a brilliant, loving, quirky, wonderful man who never had just hobbies; they always became obsessions,” said Heather Morgan. He had a deep and wide-ranging knowledge of history, which he loved to share. He also loved golf, travel, and hiking, as well as fountain pen collecting, photography, drawing, watercolor, and painting miniatures for strategy board games and Dungeons & Dragons. (For many years, he ran a weekly D&D game for his son and friends.) He was also an enormous fan of the Boston Red Sox, and he shared a love of the Oakland A’s and fantasy sports with his son.

In addition to his wife and son, Aidan, Morgan is survived by his mother, Diana Williams Morgan, of Wilkes-Barre, Pa.; father, Roy J. Morgan, Zephyrhills, Fl.; brother, David W. Morgan (Julie), Longwood, Fl.; aunt, Maxine Williams, Ashley, Pa.; nieces and nephews, and brothers and sisters-in-law. Plans for a memorial are still being discussed. Donations in John’s memory may be made to the American Autoimmune Related Diseases Association (AARDA) or The Humane Society of the United States.





Prof. David Teece named a Citation Laureate for pioneering economics research

UC Berkeley Haas School of Business Professor David J. Teece has been named as a 2021 Citation Laureate in economics for his pioneering research on entrepreneurship, innovation, and competition.

Prof. David Teece
Prof. David J. Teece

Teece is among 16 researchers from six countries whose work was deemed to be “of Nobel class” by the Institute for Scientific Information. These researchers are among the most highly cited within the Web of Science, a global database of citations in peer-reviewed journals managed by analytics firm Clarivate.

“I’m humbled to be included with such esteemed names, and wish to thank the University of California, Berkeley, the Haas School, and the Institute for Business Innovation for providing the environment that has enabled me to flourish as a scholar-entrepreneur,” said Teece, who is the Thomas W. Tusher Professor in Global Business, faculty director of the The Tusher Initiative for the Management of Intellectual Capital, and also the founder and executive chairman of Berkeley Research Group.

A global authority on the theory of firm and strategic management, competition policy, and intellectual property, Teece has written over 30 books and two hundred scholarly papers, and has been cited over 186,000 times (per Google Scholar).

Teece is well-known for his theory of “dynamic capabilities,” which says that what matters most for business is corporate agility, or the ability to sense new threats, seize opportunities, and reconfigure as necessary. His seminal 1997 paper on the concept has been cited almost 12,000 times in its original version, and 47,000 times in all versions.

For context, out of some 52 million articles indexed in the Web of Science since 1970, only 6,500 (or .01%) have been cited 2,000 or more times. Citation Laureates are identified and selected from among this group. “They are individuals whose research publications are highly cited and whose contributions to science have been extremely influential, even transformative,” according to Clarivate’s announcement.

“For a paper to be cited 2,000 times or more is a rarity,” said David Pendlebury, senior citation analyst at the Institute for Scientific Information at Clarivate. “Authors of very highly cited papers are usually members of national academies of sciences, hold senior appointments in universities and other research institutes, and have received many top international prizes in their fields. Indeed, many of them have helped to shape their fields of study.”

Clarivate uses quantitative data in addition to qualitative assessment to provide insights about the world’s most influential researchers. Citation Laureates are awarded in the areas recognized by the Nobel Prize: Physiology or Medicine, Physics, Chemistry and Economics. Since 2002, 376 researchers have been awarded Citation Laureates, and 59 of them have gone on to receive a Nobel Prize.

Teece has been a professor at the Haas School of Business since 1982. He formerly served as faculty director of the Institute for Business Innovation. He holds a PhD in economics from the University of Pennsylvania as well as 10 honorary doctorates.

“I cherish the atmosphere of open discussion and the ability to challenge received paradigms, which is a quintessential Berkeley trait,” Teece said. “We must all work hard to maintain these traits along with an interdisciplinary focus, and linkages between theory and practice. It is only by pursuing these goals that our frameworks, theories, and models can be both rigorous and relevant.”


Two Haas profs elected to the American Academy of Arts and Sciences

Berkeley Haas professors Annette Vissing-Jørgensen and Stefano DellaVigna are among the six UC Berkeley faculty members elected to the American Academy of Arts and Sciences (AAAS) for 2021.

The organization, which was founded in 1780 to honor top scholars and leaders from every field who address issues of “importance to the nation and the world,” announced 252 new members today.

Prof. Annette Vissing-Jørgensen
Annette Vissing-Jørgensen

“We are honoring the excellence of these individuals, celebrating what they have achieved so far, and imagining what they will continue to accomplish,” said David Oxtoby, president of the American Academy, in the announcement. “The past year has been replete with evidence of how things can get worse; this is an opportunity to illuminate the importance of art, ideas, knowledge, and leadership that can make a better world.”

Annette Vissing-Jørgensen holds the Arno A. Rayner Chair in Finance and Management and serves as chair of the Finance Group. Her research focuses on empirical asset pricing, monetary policy, household finance and entrepreneurship, and  spans both asset pricing and corporate finance.

Stefano DellaVigna
Stefano DellaVigna

Stefano DellaVigna is a professor of business administration at Berkeley Haas and is the Daniel Koshland Sr. Distinguished Professor of Economics in the Department of Economics.  He is co-director of the Berkeley Initiative for Behavioral Economics and Finance, and his research interests include behavioral finance and economics, psyschology and economics, and applied microeconomics.


See the full list of Berkeley faculty elected to the AAAS.

The economic impact of racial violence: Lisa Cook

The impacts of racism and discrimination have long been measured in terms of the harm done to the affected group—lower wages, lower educational attainment, or poorer health, for example.

Dr. Lisa Cook
Dr. Lisa Cook

Those measures alone are too narrow for Professor Lisa Cook, who argues that that racial, ethnic, and gender discrimination damages the economy as a whole, and not just those who face discrimination. And she’s found a way to prove it.

Cook, a professor of economics and international relations at Michigan State University and a graduate of the Berkeley Economics PhD program, shared her research as part of the “New Thinking at Berkeley Haas” speaker series. Her lecture, “The Cost of Racism,” was hosted by Laura Tyson, distinguished professor of the graduate school and former dean.

In path-breaking research, Cook linked the surge in segregation laws, lynchings, and other racial violence in the U.S. from 1870 to 1940 to a significant decline in patenting and innovation among African Americans. The economic impact of that decline was equivalent to the GDP of a medium-sized European country at the time, and the impact is still felt today, she calculated. 

“Violence diminishes innovation and economic activity, with persistent effects,” says Cook. “The year 1899 is still the peak year for patenting-per-capita for African-Americans—and that’s even using 2010 patent data.”

Cook, PhD 97, recently served as a member of President Biden’s transition team. Like Tyson, she also served on the President’s Council of Economic Advisers. Cook was a senior economist under the Obama Administration, working on innovation and the Eurozone crisis, while Tyson chaired the council under the Clinton Administration. Cook’s wide-ranging research covers economic growth and development in emerging economies, international trade, financial institutions and markets, and economic history. She is also an advocate for increasing diversity in the field of economics, serving as director of the American Economics Association Summer Training Program.

Cook has examined the implications of racial and gender disparities in income and wealth inequality at all stages of the innovation process, and developed new ways to study the long-term economic impact of race-related violence, which Tyson noted is an issue we’re very much still grappling with today. 

“This is very important, very original research showing that there are costs for our entire society, and our entire economy because of these barriers,” Tyson said. “They have personal effects on the individual, on the family, on the community, but they also have macro, aggregate, big effects.”

In order to conduct her analysis, Cook had to first compile data on race and patents, which did not previously exist. She has also helped develop a national database of lynchings that can be used in empirical research going forward. 

At the end of her talk, Cook laid out a long list of policy prescriptions to eliminate barriers for talented people to fully participate in the economy. She also said it’s a time for “big ideas and blue sky thinking” to combat persistent, systemic racism, sexism, and discrimination.

Watch the full lecture.

In honorary lecture, Dean Harrison argues for policies that increase competition

Why have some developing economies grown so much faster than others? Do economies grow faster when left alone, or can interventions such as subsidies spur more growth? Which kinds of interventions accelerate economic development—and which policies hinder it?

Dean Ann Harrison

Those were the questions motivating a talk by award-winning economist and Berkeley Haas Dean Ann Harrison, who delivered the 2021 Paul Streeten Distinguished Lecture on Global Development Policy at Boston University last week. This annual lecture celebrates the legacy of Boston University Economics Professor Paul Streeten, and was last given by Nobel Laureate Joseph E. Stiglitz.

In a talk punctuated by historical and present-day examples and grounded in empirical research, Harrison made the case that policies which promote competition are the most effective, and those that limit competition—such as tariffs—end up reducing a country’s productivity. Dean Harrison concluded by speaking about how industrial policy can be employed to fight climate change, which she described as “the biggest market failure in human history.”

Watch the lecture and read a summary of the talk by by James Sundquist, a Global China Initiative Fellow at BU’s Global Development Policy Center, below.

Don’t Be Afraid to Compete: The Role of Industrial Policy in Global Development

Presitigious Ross Prize in Financial Economics for Prof. Nicolae Gârleanu

A paper co-authored by Berkeley Haas Prof. Nicolae Gârleanu has been awarded the prestigious Stephen A. Ross Prize in Financial Economics.

The award, which includes a $50,000 prize, is given biennially to recognize a paper published in the past 15 years that made significant contributions to the field of financial economics. It was established by the Foundation for Advancement of Research in Financial Economics (FARFE) in 2008.

Berkeley Haas Prof. Nicolae Gârleanu
Prof. Nicolae Gârleanu

Gârleanu’s winning paper, Over-the-Counter Markets, was co-written by Darrell Duffie of Stanford University and Lasse Pedersen of Copenhagen Business School, and published in the journal Econometrica in 2005. Over-the-counter trading is an important and often dominant mode of trading in many markets. In contrast to centralized markets, traders in over-the-counter markets must search for counterparties and bargain over the terms of trade.

“The paper and subsequent literature have transformed our understanding of liquidity and price determination in over-the-counter markets in which many financial assets are traded,” according to the prize announcement.

“This is a very illustrious prize, and it’s a big honor for Nicolae and for Haas,” said Prof. Catherine Wolfram, Associate Dean for Academic Affairs and Chair of the Faculty. “The previous winners include Nobel Laureates, and the first winner was Berkeley Haas Emeritus Professor Hayne Leland.”

“I feel deeply honored for our paper to receive this prize,” Gârleanu said. “The quality of the previous winners, the composition of the prize committee, and of course the memory of Steve Ross—one of the fathers of modern financial economics theory and a true giant in the field—make it a very special award.”

Read the full prize announcement.


50 years in, the Clean Air Act’s societal benefits still outweigh costs 10 to 1, research finds

The Kingston Fossil Plant smokestacks rise above the trees behind homes in Kingston, Tenn. in this Aug. 7, 2019, photo. (AP Photo/Mark Humphrey)

The landmark Clean Air Act (CAA) turns 50 this month, and its impact has been dramatic: Ambient measures of pollutants have fallen more than 90% in some areas, and improvements in air quality are credited with preventing hundreds of thousands of premature deaths.

Despite this success, the debate rages on over whether the costs to industry of further pollution reductions are too high—most recently, the Trump administration declined to tighten soot rules. After five decades, has the CAA accomplished its mission?

Not even close, say two economists at the University of California, Berkeley who found a novel way to measure the compliance costs for industry by analyzing pollution offset markets. In a new working paper released today, they concluded that on average, the benefits of additional air pollution regulation exceed the costs by 10 to 1.

“We looked at many different cities, states, pollutants, and years, and found that in nearly all circumstances, regulation is currently too lenient, rather than too strict,” says Reed Walker, an associate professor at Berkeley’s Haas School of Business. “In other words, there are enormous social benefits to improving air quality just a little bit more when compared to the compliance costs for firms.”

As economists, Walker and co-author Joseph S. Shapiro, an associate professor with UC Berkeley’s Department of Agricultural & Resource Economics, wanted to understand whether the CAA had reached the point of diminishing returns. “Some of this debate stems from the remarkable improvements we’ve seen in air quality over the past 50 years,” Shapiro says. “Most economists would believe that tightening regulation further becomes incrementally more expensive for firms, which begs the question of whether an additional unit of pollution reduction is ‘worth’ the health and other benefits to society.”

Quantifying costs versus benefits

Estimates of the societal benefits of pollution abatement exist—for instance, research showed that 5% of premature mortality is from air pollution—but it’s been far more challenging to measure the true costs to producers. Walker and Shapiro found a way to do this through a CAA provision that capped pollution levels in the counties with the dirtiest air. When a manufacturer wants to open a new plant that would raise pollution above existing levels, it must either adopt cleaner technology or pay an existing plant to reduce its emissions in order to stay under the cap. These transactions—known as offsets—have led to the creation of over 500 pollution offset markets across several metro areas.

Offset prices are closely tied to the costs of additional pollution reductions. They can run into the millions of dollars, so a company only buys offsets when the cost of reducing its own pollution is even higher. That gave the researchers a way to estimate the incremental costs of pollution abatement in different cities. They assembled data on 100 offset markets in 16 states. Next, they used previous estimates of the marginal benefits of pollution reduction to assess whether the benefits of additional reductions outweigh the costs.

“We compared the incremental costs of removing one ton of pollution emissions to the incremental benefits to society of reducing the same one ton of emissions,” Shapiro says.

For example, they estimated that an existing firm in the San Francisco Bay Area would receive almost $1,500 in offset value from lowering its nitrogen oxides emissions by one ton. However, those decreased emissions are worth over $50,000 in societal benefits, due to factors such as reduced premature mortality. This led them to conclude that on average, the benefits of additional pollution regulation are about ten times the marginal costs.

This was true in every market they looked at save Houston, where they determined that regulation was too stringent on volatile organic compound emissions. The result has been marginal costs for industry that are twice as large as the estimated marginal benefits.

The researchers’ new method of calculating pollution abatement costs has led to estimates that are dramatically different than traditional estimates from the Environmental Protection Agency, possibly because EPA estimates did not account for all the economic costs that firms face. Yet even taking into account their finding that abatement costs have increased by about 6% to 9% annually over the past couple of decades, the benefits of these regulations still greatly outweigh the costs, the researchers said.

“We should always think carefully ‘on the margin’ to understand whether additional improvements in air quality are worth it,” Walker says. “In the vast majority of cities in the United States today, the answer is yes.”

Though it was not a focus of the paper, Walker and Shapiro looked at how CAA regulations could be improved. They suggested that getting rid of the current offset markets—where polluters pay for the quantity of pollution they produce—in favor of a pollution tax could be a more efficient way to improve air quality.



“Is Air Pollution Regulation Too Stringent?”  Energy Institute Working Paper 312, December 2020

Energy Institute Blog: “Is Air Pollution Regulation Too Stringent?”

New Thinking in a Pandemic: Laura Tyson & Ross Levine

Corporate social responsibility (CSR) is often seen as separate from the pursuit of profit. Yet recent research by Prof. Ross Levine found that when faced with competition, companies double down on CSR as a profitable strategy. Levine also found that companies with higher CSR scores performed significantly better during the pandemic stock market turmoil.

Noted economist Laura D. Tyson,  former Berkeley Haas dean and professor of the graduate school, hosted Levine for a discussion about his recent research finding that corporate social responsibility (CSR) is an effective competitive strategy.

“We discovered that increasing competition induces firms to increase CSR activities as a strategy for strengthening relationships with workers, suppliers and customers,” said Levine. “When firms are more monopolistic, they don’t have to worry about these kinds of relationships as much. But when they’re forced to deal with a more competitive environment, they have to embrace those relationships.”

Tyson is co-chair of Gov. Gavin Newsom’s Council of Economic Advisors (for this discussion, she did not speak on behalf of the council). She previously served as Chair of the President’s Council of Economic Advisers and Director of the White House National Economic Council for President Clinton. Levine is the Willis H. Booth Chair in Banking and Finance, and has worked at the World Bank and at the Board of Governors at the Federal Research System.


New Thinking in a Pandemic: Business, Economics & Inclusion” is a twice-monthly series hosted by Berkeley Haas faculty to highlight cutting-edge, high-level thinking and analysis on a range of topics around business, economics, and equity during the coronavirus pandemic and beyond. The series is streamed live on YouTube, where viewers can ask questions via chat.

PhD alumnus Matteo Maggiori wins prestigious Fischer Black Prize

Matteo MagioriBerkeley Haas PhD alumnus Matteo Maggiori has been awarded the American Finance Association’s 2021 Fischer Black Prize, which honors the top finance scholar under 40.

Maggiori, PhD 12, is an international macroeconomics and finance scholar whose research topics have included the analysis of international capital flows, exchange rate dynamics, bubbles, and the role of tax havens. He is an associate professor at the Stanford Graduate School of Business, a research associate with the National Bureau of Economic Research, and a research affiliate at the Center for Economic Policy Research.

“I was deeply honored to receive the call saying that I had been awarded the Fischer Black Prize. The list of previous winners is a humbling one to join, including Berkeley Haas’ own Ulrike Malmendier, the first woman to receive the prize, who I looked up to tremendously as a student—and I still do,” Maggiori said. “I am very grateful to my Berkeley advisors. They played a crucial role in my academic development, and it is wonderful to have an occasion to say a public ‘thank you.’”

Malmendier was awarded the 2013 prize, given biennially since 2003 to honor the memory of Fischer Black, who developed (with Myron Scholes) the Nobel Prize-winning Black-Scholes Option Pricing Model. Considered the most prestigious honor for young researchers in the field, the prize is awarded for a body of work that “best exemplifies the Fischer Black hallmark of developing original research that is relevant to finance practice.”

As a doctoral student at Haas, Maggiori studied with Prof. Martin Lettau, with whom he co-authored a paper that won the 2013 AQR Insight Award. (Michael Weber, PhD 14, also served as a co-author.) He was chosen in 2012 to participate in the prestigious Review of Economics Studies May Meetings, an honor given to the seven most promising graduating doctoral students in the world to present their research at several European Universities.

“Matteo was a brilliant Ph.D. student and has already made an impact on the profession. He will continue to be a leader in the field for years to come,” said Lettau, who served as one of Maggiori’s advisors along with Prof. Nicolae Gârleanu, Prof. Pierre-Olivier Gourinchas, and Prof. Emeritus Andrew Rose of Berkeley Haas, along with Prof. Maurice Obstfeld of Berkeley Economics. “We’re proud that he has been recognized with the most prestigious award for young financial economists.”

Maggiori is a recipient of a 2019 Guggenheim Fellowship, and the 2019 Carlo Alberto Medal for the best Italian Economist under the age of 40. He also won the 2017 AQR Young Researcher Award. He previously served as an associate professor of economics at Harvard University and as an assistant professor at the Stern School of Business at New York University.

Prof. Janet Yellen, trailblazing former Fed chair, is Biden’s Treasury pick

Updated Nov. 30

Berkeley Haas Professor Emeritus Janet Yellen, the first woman to have led the Federal Reserve, is expected to take on another trailblazing role as President-elect Joseph Biden’s Treasury secretary.

Yellen, who taught economics to thousands of undergraduate and graduate students during her 26 years as an active Berkeley Haas faculty member, would be the first woman to lead the Treasury Department. If confirmed, she will be the new president’s lead economic advisor as he confronts the fallout from the coronavirus pandemic and lockdown.

“As a brilliant economist with great personal humility and empathy for the people behind the statistics, Janet Yellen embodies the best of Haas and UC Berkeley,” said Dean Ann Harrison. “We are proud and excited to hear the news that she will be the new president’s top economic advisor at this very difficult time for the country. She also carries on a proud tradition of Berkeley women in economic leadership roles. Our country will be in excellent hands.”

[Janet Yellen] carries on a proud tradition of Berkeley women in economic leadership roles. —Dean Ann Harrison

Yellen is one of several female UC Berkeley economics professors to have shattered the glass ceiling in the male-dominated field, at the highest ranks of government. Former Berkeley Haas Dean Laura Tyson, distinguished professor of the graduate school, was the first woman to chair the President’s Council of Economic Advisers (CEA) and the National Economic Council, both during the Clinton administration. Tyson led the effort to nominate Yellen to her first high-level government position on the Federal Reserve Board of Governors. Berkeley Economics Professor Christina Romer also chaired the CEA for four years in the Obama administration. (Berkeley economics PhD alumna Lisa Cook, a professor at Michigan State University, has been named to Biden’s Federal Reserve transition team.)

Time Magazine cover, January 2014

Yellen was appointed by former President Barack Obama in 2014 to chair the Fed’s Board of Governors, serving in what has been called the world’s most powerful economic job until 2018. She was praised for achieving “near perfection” during her tenure, steering the central bank with steadfast pragmatism in a slow series of interest rate increases. Unemployment fell from 6.7% to 4.1%, inflation stayed low, and the economy built up a head of steam. Her policies are credited with helping to drive unemployment to its lowest level in 50 years before the coronavirus hit.

With the pandemic now raging, Yellen—who, since leaving the Fed, has been in residence as a distinguished fellow at the Brookings Institution and has worked on California Gov. Gavin Newsom’s Task Force on Jobs and Competitiveness—will be walking back into a situation that’s very different from what she left just two years ago. Prof. Jim Wilcox, who knew Yellen as a faculty member and also served as a senior economist with the Federal Reserve and the President’s Council of Economic Advisors, said she will have some important advantages.

“First, the new administration could hardly find someone who’s had more experience in Washington policy-making over the past couple of decades. She’s been around, and she’s earned the respect of folks widely in policy circles, not to mention academic circles and financial markets, which will help a lot,” Wilcox said. “One of the advantages the new administration has is we now have a lot more data on what works and what doesn’t, and I have no doubt she’s been thinking long and hard about this ever since we learned to spell COVID. What you’re likely to see is a much sharper, more finely honed set of policies.”

I have no doubt she’s been thinking long and hard about this ever since we learned to spell COVID. What you’re likely to see is a much sharper, more finely honed set of policies. —Prof. Jim Wilcox

Tyson, who was actively involved in recruiting Yellen and her husband, Prof. Emeritus George Akerlof, to Berkeley and has remained a close colleague and friend, recently worked with Yellen and Berkeley Haas Assoc. Prof. Adair Morse to develop an innovative small business loan program, the California Rebuilding Fund, launched last week. “One of her goals as Treasury Secretary will be to increase federal funding for small businesses that have been hit disproportionately hard by the pandemic,” Tyson said.

Yellen served as the Fed’s vice chair from 2010 to 2014, in the wake of the financial crisis, and was president and chief executive officer of the Federal Reserve Bank in San Francisco from 2004 to 2010. She chaired the President’s Council of Economic Advisers from 1997 to 1999 during the Clinton administration. She will become the first person to have served as Fed chair, chair of the Council of Economic Advisors, and Treasury Secretary, if confirmed.

Born in Brooklyn in 1946, Yellen studied economics at Brown University and earned her PhD at Yale University. She studied with economist Joseph Stiglitz, who later shared the 2001 Nobel Prize in economics with Yellen’s husband, Akerlof, and Michael Spence of Stanford University. 

After starting her academic career as an assistant professor at Harvard University and a brief early stint as a Federal Reserve economist, Yellen joined the Berkeley Haas faculty in 1980, also holding an appointment in the economics department from 1999 to 2003. For the next 26 years, she taught thousands of MBA and undergraduate students in the required macroeconomics course, as well as graduate courses in economics and trade. Her academic research focuses on unemployment and labor markets, monetary and fiscal policies, and international trade. Beloved by her students, she earned the school’s highest teaching honor, the Earl F. Cheit Award for Excellence in Teaching, in 1985 and 1988. She now holds the title of Eugene E. and Catherine M. Trefethen Professor Emeritus of Business Administration. She was named as a Distinguished Fellow by the American Economic Association in 2012.

Prof. Janet Yellen teaching at Berkeley Haas, year unknown. (Photo: Bruce Cook)

Berkeley Haas Finance Prof. Ulrike Malmendier said it was Akerlof, and to a lesser extent Yellen, who recruited her to Berkeley in 2012, taking the time to convince her that it was the best place for her. “They both started out as purist researchers who asked unusual questions, and she has never lost the researcher’s mind of curiosity,” said Malmendier, who won the prestigious Fischer Black Prize for her behavioral economics research in 2013. “They are also a wonderfully sweet and loving couple, who always take the time to ask about what you’re working on, in a world where not everyone is that way.”

Malmendier said Yellen’s manner and resilience stood out in the male-dominated field. “Some people become more brusque to move ahead, but she never let herself be molded. She kept caring about what she wants to care about, as a brilliant woman who can combine research and policy at the highest level.” Yellen’s style is reminiscent of how Socrates is described, Malmendier said. “Rather than always assert her position, she just keeps asking questions, with a humble persistence. And eventually you realize maybe you weren’t right.”

Malmendier said one of her neighbors recently noticed Yellen perusing the produce aisle at North Berkeley’s Monterey Market. When she approached her and said, “You’re Janet Yellen! What are you doing here?,” Yellen smiled and replied “Well, I would never miss the tomato season at Monterey Market.”

Former Berkeley Haas Dean Rich Lyons, who is now chief innovation and entrepreneurship officer for UC Berkeley, said Yellen embodies the culture that he codified at Haas. “It is hard for me to think of a better exemplar of the Haas School’s four defining leadership principles than Janet Yellen. Confidence without attitude? To a T. Question the status quo? She is constantly seeking better ways. Beyond yourself? If you know her, you know this is her. Students always? A more honest thinker would be hard to find.”

Executive MBA students meet with Janet Yellen and Laura Tyson during a Washington, D.C. immersion week in 2015.

Related stories:

Janet Yellen Fact Sheet

Janet Yellen leaves the Fed after achieving “near perfection”

Those darn property taxes! Insights from Texas tax protests

Aerial view of suburban neighborhoodEveryone loves to complain that their taxes are too high. Yet few people actually take the time to formally protest them.

A recent deep-dive into property tax appeals in Texas offers new insights on what motivates people to protest or accept their tax obligations.

“Historically, the study of people’s support for taxation was limited to survey data, asking people whether they prefer higher or lower taxes,” says Berkeley Haas Assoc. Prof. Ricardo Perez-Truglia says. “However, some individuals may say that they want higher taxes but, when the stakes are real, they may not put their money where their mouths are.”

Some individuals may say that they want higher taxes but, when the stakes are real, they may not put their money where their mouths are. —Ricardo Perez-Truglia

In his National Bureau of Economic Research working paper, Perez-Truglia worked with Brad Nathan and Alejandro Zentner from the University of Texas at Dallas on unique field experiments that measured how different types of information affected people’s propensity to protest their taxes. Through this first-hand look at how people actually behave when it comes to protesting taxes, they found that people are generally motivated by self-interest—but that can be dampened when they find out they’re paying less than their neighbors. They also found significant differences between Democrats and Republicans.

Dallas County tax protests

The researchers conducted their experiments in Dallas County—the second largest county in Texas, with a population of about 2.6 million. Given that the state has no income tax, property taxes provide a large source of revenue. The average household currently pays about 2% of their home’s market value annually, or about $6,000. Yet local rules allow residents to appeal their tax bills. This year, 8.4% of households filed a protest on their own, and an additional 8.4% filed a protest with the help of an agent. The researchers estimated that around half of all protests were successful; those who prevailed got a $600 tax-bill reduction, on average.

Perez-Truglia and his co-authors were interested in why people make the decision to protest or not. They first examined whether higher tax rates led to more protests, which would support the idea that homeowners act in their own self-interest. Due to a rule in the Texas property code that lets homeowners apply for “homestead” status, which caps increases in the appraised value of their primary residence at 10% per year, the researchers were able to compare homes that fell under that cap with those that didn’t. That allowed them to calculate that the probability of protesting does increase by about 3.7 percentage points per a 0.1 percentage point increase in the tax rate cap.

Hassle costs

Next, they looked at what prevents people from filing protests. There’s no fee requirement, but it does take time to learn how to submit an appeal. To examine these hassle costs, the researchers randomly sent letters to certain homeowners with information on how to file a protest. Some people received letters with a step-by-step guide on how to file an appeal, while others got additional information on how to argue for why their property taxes should be reduced. The letters were customized with the homeowners’ name, a suggested argument that the property was worth less than the assessed value, and a mention of websites like Zillow and Redfin, where people can look up prices of comparable properties. (The letters were labeled as coming from a University of Texas research study and included a url where people could find more information.)

Among those households which didn’t receive any letter, about 9% filed protests on their own. The group that received the basic information on how to appeal increased their probability of protesting by about 1.8 percentage points. Meanwhile, the group that received more details on how to form an argument filed protests at a rate 3.5 percentage points higher than the control group—which represented a 40% increase. This implied that a large reason for why homeowners did not file protests was due to the extra work it took to figure out how to file. Using these results, the researchers calculated that the hassle costs were about $226 on average. Given that only about half of appeals are successful—making the average benefit under $300—this suggests that the costs of filing likely outweighs the benefits.

But what do the neighbors pay?

The researchers also examined whether people considered how their decisions related to broader social goals. In letters sent to an additional group of homeowners, they included information on the county’s average tax rate. They did this to explore whether people are willing to accept their assessed tax rate if they know others are facing even higher burdens—a phenomenon that economists call conditional cooperation. Indeed, they found that giving people additional information on what other residents pay decreased the likelihood that they would file a protest. In sum, they estimated that a 0.1 percentage point increase in the tax rate would increase the likelihood that an individual household would file a protest by almost 10 percentage points. But if taxes were raised countywide by 0.1 percentage point, then the household’s likelihood of protesting would only increase by about 6.4 percentage points.

Finally, the researchers also analyzed differences by whether people were registered as Democrats (about 55% of the county’s homeowners) or Republicans (about 45% of homeowners). Both voter groups responded to information about the benefits and costs of protesting, but Republicans were more likely than Democrats to increase their rate of protests after receiving the detailed letter. However, Perez-Truglia noted that the differences were not as great as our political rhetoric suggests.

Survey data shows that Republicans and Democrats are worlds apart in their support for taxation, but our preliminary findings suggest that those differences are more modest when you look at their behavior. —Ricardo Perez-Truglia

“Survey data shows that Republicans and Democrats are worlds apart in their support for taxation, but our preliminary findings suggest that those differences are more modest when you look at their behavior,” Perez-Truglia says. “I see this finding as good news: there may be a lot more room for agreement than what the survey data (and the media) may suggest.”

Ranking puts Prof. Teece as top-cited scholar in business; Prof. Levine #10 in economics

Prof. David Teece

Prof. David J. Teece was ranked as the world’s most-cited scholar in the field of business and management in an analysis of author citations across all the sciences published by the journal PLOS Biology.

Prof. Ross Levine is the 10th most-cited author out of 33,500 researchers in the field of economics, according to the analysis.

The author database assessed scientists’ career-long impact by counting the number of citations of their work from 1960 through 2019. Starting from a pool of eight million scientists who have published at least five papers in their careers, the article ranked the top 2% of authors across 174 fields.

Teece, the Thomas W. Tusher Professor in Global Business and faculty director of the Tusher Center for The Management of Intellectual Capital, came in No. 1 among more than 36,000 authors publishing in the field of business and management. The database counted 37,700 citations of his work, excluding self-citations.

Teece is an expert on industrial organization, technological change, and innovation, particularly as it relates to antitrust, competition, and intellectual property. According to Google Scholar, which is based on a broader measure of citations, his work has been cited almost 170,000 times in all.

Ross Levine
Prof. Ross Levine

Levine is the Willis H. Booth Chair in Banking and Finance at Berkeley Haas, and an expert on how finance and regulation shapes the economy. The database counted 31,000 citations of his work. Based on Google Scholar, his work has been cited almost 160,000 times in all. Levine was also ranked as the 12th most-cited economist in the world by the website IDEAS, which is the largest online database of economics research.

Berkeley and Haas have long been economics powerhouses, supplying economists to state and federal governments as well as central banks around the world.

The PLOS Biology database, “Updated science-wide author databases of standardized citation indicators,” was created by John Ioannidis of Stanford University, Kevin Boyack if SciTech Strategies, and Jeroen Baas of Elsevier Research Intelligence.

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