Research
Working Papers
With Hemanth Asirvatham, Chiara Betti, Rachel Brown, Arnaldo Camuffo, Aaron Chatterji, Chiara Fumagalli, Alfonso Gambardella, Myriam Mariani, Abhinav Pandey, Giovanni Salvucci, and Vladimir Simic
Abstract
We study whether LLMs and cognitive skills influence the evaluation of novices’ intellectual tasks, when these evaluations depend on standard and well-defined performance criteria. This is a common case (junior employees, students’ exams) making our question relevant. In a 2×2 randomized control trial, we assign 1,053 first-year undergraduates in economics, management and finance to one of four conditions: a training on causal reasoning (as a relevant cognitive skill for intellectual tasks), ChatGPT Edu access (GPT-4o), both, or neither. We provide a real-world merchandising business problem and ask experts to evaluate the participants’ solutions according to standard metrics in marketing. We find that causal reasoning changes how students think, leading to mechanism-based solutions and a greater diversity of ideas. However, causal reasoning does not improve evaluations, unlike ChatGPT. Greater textual coherence and a higher number of ideas explain about half of the ChatGPT effect, suggesting that, for novices facing well-defined problems, LLMs produce solutions that resemble expert recommendations not only in textual quality, but also in content. We also find that, when combined with causal training, ChatGPT increases the use of coherent logic, falsification logic, and the attempt to understand why (mechanisms). Overall, we find that human causal reasoning produces effects independently of LLMs, particularly on the diversity of ideas, and therefore it is worth cultivating causal reasoning in a world in which students use LLMs. Probably less appreciated is that the value of diverse ideas also requires an evaluation system that demands diversity rather than standard solutions. With Bradley Katcher, Geng Li, and Alvaro Mezza
Abstract
We document a secular trend of increasing auto loan maturity from 30 months to over 70 months during the past 50 years, partly reflecting improved vehicle durability. Analyzing more than half of the auto loans originated during the past 16 years, we find that longer-maturity new car loans have significantly higher interest rates with a yield curve much steeper than comparable-maturity Treasury securities. In addition, we show that the majority of auto loans were prepaid, including loans of zero interest, and that many prepaying borrowers could have paid materially less interest by choosing loans of a shorter maturity. We argue that factors such as liquidity constraints, uncertainty about future income, and monthly payment targeting likely account for only a portion of borrowers’choice of long-maturity loans. Works in Progress
Skills without the Bills? Apprenticeships, Career Technical Education, and Consumer Credit Outcomes
With Kassandra Hernndez and Gabrielle Lohner
The Effects of Parent PLUS Loans on Educational and Family Finances
With Sandra Black, Jeffrey Denning, Robert Fairlie, Oded Gurantz, and Michael Jensen
When the Credit Dries Up: Examining the Effect of Water Utility Surcharges on Consumer Credit
With Hannah Farkas and Derek Wietelman
Abstract
In California, the delivery of water is handled through nearly 3,000 different utilities, some private and some public, each facing different regulations and charging consumers according to different pricing schemes. These water utilities supply water from different sources (e.g., local vs. imported, groundwater vs. surface water) and are not tied to municipal boundaries. Meanwhile, as the demand for water continues to climb in California, water supply is projected to decrease due to climate change-related stressors, leading utilities to increase rates or impose surcharges to recuperate costs. This perfect storm threatens a household’s ability to access clean water while maintaining their financial well-being. In fact, a recent survey from the California Water Board estimates that roughly 1.6 million households, or 12% of households in the state, hold $1 billion in water utility debt. On average, these households owe $500 each, but around 150,000 households owe over $1,000. Motivated by these facts, we leverage a difference-in-differences research design to examine the causal effects of utility surcharges on household finance. To accomplish this, we utilize the Consumer Credit Panel, a dataset with information on credit usage, credit score, and delinquency for all households with a credit history in California. We examine how changes in water bills impact such household financial outcomes. This empirical approach allows us to determine the relationship between water utility bills and financial wellbeing, while shedding light on how drought surcharges impact households unequally. Other Publications
With Sarah Hoover and Evan White
With Sarah Hoover and Evan White
With Sarena Goodman
