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Title: Data and incentives
“Big data” gives markets access to previously unmeasured characteristics of individual agents. Policymakers must decide whether and how to regulate the use of this data. We study how new data affects incentives for agents to exert effort in settings such as the labor market, where an agent's quality is initially unknown but is forecast from an observable outcome. We show that measurement of a new covariate has a systematic effect on the average effort exerted by agents, with the direction of the effect determined by whether the covariate is informative about long‐run quality versus a shock to short‐run outcomes. For a class of covariates satisfying a statistical property that we callstrong homoskedasticity, this effect is uniform across agents. More generally, new measurements can impact agents unequally, and we show that these distributional effects have a first‐order impact on social welfare.  more » « less
Award ID(s):
1851629
PAR ID:
10561642
Author(s) / Creator(s):
;
Publisher / Repository:
Econometric Society
Date Published:
Journal Name:
Theoretical Economics
Volume:
19
Issue:
1
ISSN:
1933-6837
Page Range / eLocation ID:
407 to 448
Subject(s) / Keyword(s):
Big data, forecasting, effort incentives, career concerns
Format(s):
Medium: X
Sponsoring Org:
National Science Foundation
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