We study a controlled corporate experiment in which loan officers was altered from fixed salary to volume-based pay. The incentives increased aggressiveness of origination: higher origination rates (+31%), loan sizes (+15%), and default rate (+28%). The effects are partly driven by moral hazard: approval decision is driven by loan officers’ discretion; however, default is uncorrelated with disc...

In the data, most consumer defaults on unsecured credit are informal and the lending industry devotes significant resources to debt collection. We develop a new theory of credit card lending that takes these two features into account. The two key elements of our model are moral hazard and costly state verification that relies on the use of information technology. We show that the model gives ri...

We exploit data from the 1986–87 Washington Alternative Work Search experiment (merged with nine years of follow-up administrative wage records) to estimate the causal effects of eliminating the unemployment insurance (UI) work search requirement (WSR) on duration of nonemployment, tenure with first post-claim employer, number of post-claim employers, long­ term earnings, employment, and hours ...

In the data, most consumer defaults on unsecured credit are informal and the lending industry devotes significant resources to debt collection. We develop a new theory of credit card lending that takes these two features into account. The two key elements of our model are moral hazard and costly state verification that relies on the use of information technology. We show that the model gives ri...

Moral psychology and naturalistic moral philosophers should strive to understand howmoral and non-moral norms differ. Using Patricia Churchland’s recent book Braintrust as an example, I describe the pitfalls of failing to take this issue seriously, and I introduce a new research program about the delineation of the moral domain. Which norms and normative judgments belong to the moral domain, an...