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Department of Economics

Do different monetary incentives change an individual's environmental morale? asks Associate Professor Lory Barile

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Do different monetary incentives change an individual's environmental morale? asks Associate Professor Lory Barile

Monday 29 Jul 2019

What research projects are you currently involved with?

Broadly speaking I’m doing research on behavioural and experimental economics, and public sector economics.

I recently focused my research on behavioural and environmental economics. I looked at the impact of different monetary incentives (i.e. a nudge and a shove) on individuals’ recycling behaviour and how this links with people’s ‘green identity’, measured in my research via an ‘environmental morale’ index. Results showed that the nudge was much more effective than the shove to increase individuals’ willingness to recycle, especially when focusing on people with high environmental morale. This suggests that the same incentive may not be effective for all individuals - i.e. one size does not fit all! I also looked at individuals’ time preferences over different goods (i.e. monetary, environmental and health gains and losses) and how this can be affected by intrinsic motivation to conserve the environment. Results suggest that environmental morale is likely to increase ‘impatience for action’ to conserve the environment. This dimension of time preference is relevant when it comes to explain differences between discount rates in different domains, which questions whether we should continue to rely on one discount rate for cost-benefit analysis.

I am currently involved in a research project on closing the gender competition gap. Modern societies are characterised by large differences between men and women with regards to income, status in society, and success in the labour force, which research has largely attributed to differences in competition. Specifically, women are generally less likely to be engaged in competitiveness. This asymmetry has not only raised significant questions about the fairness of the selection process but also the allocation of opportunities. With a laboratory experiment, we are trying to test whether a simple psychological trick - i.e. priming (or nudging) an individual prior to competition - will reduce this gap and mitigate the undesired effects of differences in competition preferences.

Another area of research on which I am particularly interested in is taxation and tax evasion. Together with other colleagues, I am working on a project aimed at analysing the discrepancy between the way people think about tax evasion and benefits fraud and their actual behaviour. They normally say that it’s wrong, but when it comes to actual behaviour they behave in a completely different way. Using the British Social Survey data (2016), we are looking at how moral beliefs are likely to influence the decision to evade taxes and commit benefits fraud. Most of the literature in this area of research has been focused e.g. on the role of social norms to predict individuals’ behaviour towards tax evasion and benefits fraud. By comparison, little attention has been paid to the relevance of morality and to the way in which moral beliefs are likely to influence the decision to engage in illegal actions such as tax evasion and benefit fraud. The project questions the relevance of moral beliefs and the different ways in which moral beliefs are likely to inform perceptions of the intrinsic value of honesty.

I guess, the reason why I decided to become an economist is because I was interested in getting a better understanding of the complex society in which we live, and economics helped me to make genuine progress on this!
Associate Professor Lory Barile

What impact do you hope your research will have on society?

I like to look at things that may have an impact on public policy, especially this idea of nudging individuals to change attitudes or behaviour. For example, research suggests that a possible way to nudge individuals is by changing their default options. An application of this is the opt-out system introduced for organ donations, where citizens do not have to opt-in for organ donations (as it is currently done in England), but they are automatically registered as donors unless they choose to state otherwise. Following the example of Spain and many other European countries (e.g., Italy and Portugal) where the opt-out-system has been successfully implemented, from spring 2020 the UK will also introduce a similar system. This simple example shows how little things like changing a default option can really make a big difference in our lives.

I hope that my research will inform policy makers and provide evidence to design better policies.

One of the challenges we face as behavioural economists is the generalisation of the findings of our studies, which is commonly known as the external validity of a scientific study. A possible way to overcome this problem is to replicate the study in different contexts with different individuals. However, even by doing so, it might be the case that you end up with completely different results. Having said this, behavioural economics has widened scholars’ conceptual toolkit, encouraged research that is concerned with actual behaviour, and fostered a ‘test and learn’ culture among governments.

What interested you about this area of research?

I became interested in public sector economics because of the implications of Government policies on our daily life, especially in terms of efficiency and equity. I initially focused my attention on tax evasion as, along with the obvious problem of the underfunding of the government, tax evasion raises fundamental questions about the fairness of the tax system. I found it fascinating to try and understand why people (do not) pay taxes and how they trade-off their honest behaviour with the risks they incur when they decide not to be compliant with their ‘social responsibilities’.

This is what motivated me to focus on behavioural economics to analyse what motives drive individuals’ behaviour, especially when this departs from theoretical models and ‘rational’ behaviour advocated by neoclassical economics. Behavioural economics has changed the way we look at the public sector. Public sector economics has made great strides in understanding ‘market failures’ (in the case of traditional public sector economics) and ‘government failure’ (in what is known as the public choice approach) focusing on a rational representative individual -i.e. homo economicus. However, experiments after experiments in behavioural economics have shown that people are likely to depart from predicted rational behaviour in many ways, which lead to a number of anomalies that characterise a more realistic economic actor -i.e. homo realitus. This has introduced a new dimension into the problem as Governments now are facing the challenge of designing policies able to correct both ‘market failure’ and ‘individual failure’ (i.e., failure here refers to the idea that people behaviour departs from rational behaviour).

The Thaler and Sunstein’s (2008) idea of ‘nudging’ individuals to make better decisions has also opened a debate on how to use nudging as an effective policy tool. There is a lot of work still to be done here and this is what makes this area of research particularly attractive to me.

Why did you decide to become an economist?

When I left high school, I knew I wanted to continue to study, but I did not know what degree to choose. I finally chose a broad social science degree where we had the chance to study different subjects, including economics, which I did not study in high school. What I really enjoyed in high school was mathematics, which is somehow related to economics. After the first two years of the degree, we could specialise in one of our favourite disciplines, and I chose economics as I loved studying microeconomics – and I still love it!

Economics offers practical tools to help people with real problems they face in the world every day. It offers an opportunity to understand simple concepts such as unemployment or public debt in the news. It helps us to make decisions in our daily life such as engaging in a particular financial activity or not. Economics is also about understanding political debates which affects how people votes and ultimately public policies. I guess, the reason why I decided to become an economist is because I was interested in getting a better understanding of the complex society in which we live, and economics helped me to make genuine progress on this!

Why did you join the Economics Department at Warwick?

The quality of the department makes it a very stimulating place where to do research. Economics at Warwick is very strong in applied microeconomic, public policy analysis and there is also an increasing number of colleagues working on behavioural and experimental economics. A strong group in all these areas was a big factor.

Even the teaching side is strongly correlated with research. This is a big plus not only for our undergraduate and postgraduate students, but also for us as academics as research-led teaching brings into classes our enthusiasm and expertise in the field and allows us to talk about the recent developments of our research.

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