Craig AC & Martin D. “Discipline Reform, School Culture, and Student Achievement”. [Working Paper] [IZA Version] [EdWorkingPapers Version]Does relaxing strict school discipline policies improve student achievement, or lead to classroom disorder? We study a 2012 reform in New York City public middle schools that eliminated suspensions for non-violent, disorderly behavior, replacing them with less disruptive interventions. Using a difference-in-differences framework, we exploit the sharp timing of the reform and natural variation in its impact to measure the effect of reducing suspensions on student achievement. Math scores of students in more-affected schools rose by 0.05 standard deviations relative to other schools over the three years after the policy change. Reading scores rose by 0.03 standard deviations. Only a small portion of these aggregate benefits can be explained by the direct impact of eliminating suspensions on students who would have been suspended under the old policy. Instead, test score gains are associated with improvements in school culture, as measured by the quality of student-teacher relationships and perceptions of safety at school. These improvements benefited students even if they were unlikely to be suspended themselves.
Craig AC & Fryer RG Jr. “Complementary Bias: A Model of Two-Sided Statistical Discrimination”. [Working Paper] [NBER Version]We introduce a model of two-sided statistical discrimination in which worker and firm beliefs are complementary. Firms try to infer whether workers have made investments required for them to be productive, and simultaneously, workers try to deduce whether firms have made investments necessary for them to thrive. When multiple equilibria exist, group differences are sustained by both sides of the interaction – workers and firms. Strategic complementarity between the two sides complicates both empirical analysis designed to detect discrimination and policy meant to alleviate it. Affirmative action is much less effective than in traditional statistical discrimination models. More generally, we demonstrate the futility of policies that are designed to correct gender and racial disparities but do not address both sides of the coordination problem. We propose a two-sided version of “investment insurance” – a highly effective and potentially cheap policy in which the government (after observing a noisy version of the employer’s signal) offers to hire any worker who it believes to be qualified and whom the employers do not offer a job. The paper concludes by proposing a way to identify statistical discrimination by employers when beliefs are complements.
Amer A, Craig AC & Van Effenterre C. “Does Better Information Reduce Gender Discrimination in the Technology Industry?” [Working Paper]Performance evaluation matters for hiring and promotion decisions. We combine experiments with administrative data to show that the presence of personal interactions affects the display of gender bias in performance evaluations. Leveraging 60,000 mock interviews from an online platform for software engineers, we document that women receive lower ratings for code quality and problem solving than men, even after controlling for an automated measure of performance which is predictive of future labor market outcomes. We analyze two field experiments, which vary the information seen by evaluators, to shed light on what drives these gaps. When interviews are conducted via video chat, our first experiment shows that providing evaluators with additional measures of performance does not reduce the gender gap in evaluations. This motivates a second experiment which removes video interaction, and compares blind to non-blind evaluations. There is no longer a detectable gender gap in either case. These results are hard to reconcile with traditional economic models of discrimination. Instead, the fact that the degree of bias depends on the context in which evaluation occurs is more consistent with a form of implicit bias that arises with personal interaction.
Craig AC & Slemrod, JB. “Tax Knowledge and Tax Manipulation: A Unifying Model”, Journal of Political Economy: Microeconomics (accepted). [Working Paper] [TTPI Version] [NBER Version]Taxpayers face complex tax systems, which many struggle to understand while others strive to exploit. We characterize optimal tax rates and taxpayer education when heterogeneous individuals have an incomplete understanding of the tax system. The analysis shows how learning about tax minimization strategies is isomorphic to learning about tax rates. In both cases, the government faces a trade-off: Educating taxpayers allows them to better optimize, but affects government revenue. The optimal amount of taxpayer education and redistribution are both characterized by aggregate sufficient statistics, which do not require information about how biases or behavioral responses vary across decision margins.
Craig AC (2023). “Optimal Income Taxation with Spillovers from Employer Learning”, American Economic Journal: Economic Policy, 15(2), 82-125. [Working Paper] [Publisher’s Version]I study optimal income taxation when human capital investment is imperfectly observable by employers. In the model, Bayesian inference about worker productivity compresses the wage distribution, lowering the private return to human capital investment. An externality arises: given the same information, employers form more favorable beliefs about each individual if workers are generally more productive. The significance of this externality hinges on the accuracy of employers’ beliefs and the responsiveness of human capital investments to taxation. For the United States, the spillover from human capital investment reduces optimal marginal tax rates by 13 percentage points at 100,000 dollars of income.
Craig AC & Hines, JR Jr (2020). “Taxes as Pandemic Controls”, National Tax Journal, 73(4), 969-986. [Working Paper] [Publisher’s Version].Tax policy can play important roles in limiting the spread of communicable disease, and in managing the economic fallout of a pandemic. Taxes on business activities that bring workers or customers into close contact with each other offer efficient alternatives to broad regulatory measures such as shutdowns, which have been effective but enormously costly. Corrective taxation also helps raise the revenue required to cover elevated government expenditure during the pandemic. Moreover, the restricted consumer choice that accompanies a pandemic reduces the welfare cost of raising tax revenue from higher-income taxpayers, making it a good time for deficit closure. Current U.S. tax measures serve some of these functions, but additional measures could further limit the spread of disease while also addressing government budget deficits.
Craig AC, Garbarino E, Heger SA, Slonim R (2017). “Waiting to Give: Stated and Revealed Preferences”, Management Science, 63(11), 3672-3690. [Paper] [Publisher’s Version]We estimate and compare the effect of increased time costs on consumer satisfaction and behavior. We are able to move beyond the existing literature, which focuses on satisfaction and intention, and estimate the effect of waiting time on return behavior. Further, we do so in a prosocial context and our measure of cost is the length of time a blood donor spends waiting. We find that relying on satisfaction data masks important time cost sensitivities; namely, it is not how the donor feels about the wait time that matters for return behavior, but rather the actual duration of the wait. Consistent with theory we develop, our results indicate that waiting has a significant longer-term social cost: we estimate that a 38% increase (equivalent to one standard deviation) in the average wait would result in a 10% decrease in donations per year.
Works in Progress
Improving Youth Hiring Decisions with Data and Machine Predictions (with Hyunjin Kim)
Writing For Broader Audiences
Craig AC (2023). “The government should butt out on the RBA and focus on its own failings”, Sydney Morning Herald, June 11. [Online]
Craig AC (2016), Submission DR85, Education Evidence Base - Public Inquiry, Productivity Commission. Online
Craig AC (2014). “Banking Fees in Australia”, RBA Bulletin, June Quarter. [Online]
Sunrise in Canberra (Mulligan’s Flat)