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on Cognitive and Behavioural Economics |
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Issue of 2024‒04‒22
six papers chosen by |
| By: | Deborah A. Cobb-Clark (School of Economics, The University of Sydney); Sarah C. Dahmann (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Daniel A. Kamhöfer (Institute of Economics, University of Kaiserslautern-Landau); Hannah Schildberg-Hörisch (Düsseldorf Institute for Competition Economics, Heinrich Heine University Düsseldorf) |
| Abstract: | While there is an established positive relationship between self-control and education, the direction of causality remains a matter of debate. We make a contribution to resolving this issue by exploiting a series of Australian and German educational reforms that increased minimum education requirements as a source of exogenous variation in education levels. Instrumental variables estimates suggest that, for people affected by the reforms, an additional year of schooling has no effect on self-control. |
| Keywords: | self-control, quasi-experiments, compulsory schooling reforms, Brief Self-Control Scale |
| JEL: | D90 I26 C26 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2024n02&r=cbe |
| By: | Simon Gächter (University of Nottingham); Esther Kaiser (ZHAW School of Management and Law); Manfred Königstein (University of Erfurt) |
| Abstract: | Explicit and implicit incentives and opportunities for mutually beneficial voluntary cooperation co-exist in many contractual relationships. In a series of eight laboratory gift-exchange experiments, we show that incentive contracts can lead to crowding out of voluntary cooperation even after incentives have been abolished. This crowding out occurs also in repeated relationships, which otherwise strongly increase effort compared to one-shot interactions. Using a unified econometric framework, we unpack these results as a function of positive and negative reciprocity, as well as the principals’ wage offer and the incentivecompatibility of the contract. Crowding out is mostly due to reduced wages and not a change in reciprocal wage-effort relationships. Our systematic analysis also replicates established results on gift exchange, incentives, and crowding out of voluntary cooperation while exposed to incentives. Overall, our findings show that the behavioral consequences of explicit incentives strongly depend on the features of the situation in which they are embedded. |
| Keywords: | principal-agent games; gift-exchange experiments; incomplete contracts, explicit incentives; implicit incentives; repeated games; crowding out |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2024-02&r=cbe |
| By: | Sergio Rebelo; Miguel Santana; Pedro Teles |
| Abstract: | We study a model where households make decisions according to a dual-process framework widely used in cognitive psychology. System 1 uses effortless heuristics but is susceptible to biases and errors. System 2 uses mental effort to make more accurate decisions. Through their pricing behavior, monopolistic producers can influence whether households deploy Systems 1 or 2. The strategic use of this influence creates a new source of price inertia and provides a natural explanation for the "rockets and feathers" phenomenon: prices rise quickly when costs increase but fall slowly when costs fall. Our model implies that price stability is not optimal. |
| JEL: | E31 E32 E52 E71 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32214&r=cbe |
| By: | Thomas Epper; Julien Senn; Ernst Fehr |
| Abstract: | The empirical evidence on the existence of social preferences—or lack thereof—is predominantly based on student samples. Yet, knowledge about whether these findings can be extended to the general population is still scarce. In this paper, we compare the distribution of social preferences in a student and in a representative sample. Using descriptive analysis and a rigorous clustering approach, we show that the distribution of the general population’s social preferences fundamentally differs from the students’ distribution. In the general population, three types emerge: an inequality averse, an altruistic, and a selfish type. In contrast, only the altruistic and the selfish types emerge in the student population. The absence of an inequality averse type in the student population is particularly striking considering the fact that this type comprises about 50 percent of the individuals in the general population sample. Using structural estimation, we show that differences in age and education are likely to explain these results. Younger and more educated individuals—which typically characterize students— not only tend to have lower degrees of other-regardingness but this reduction in other-regardingness basically nullifies behindness aversion among students. Differences in income, however, do not seem to affect social preferences. These findings provide a new cautionary tale that insights from student populations might not extrapolate to the general population. |
| Keywords: | social preferences, altruism, inequality aversion, preference heterogeneity, subject pools, sample selection |
| JEL: | C80 C90 D30 D63 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11009&r=cbe |
| By: | Eva M. Berger; Ernst Fehr; Henning Hermes; Daniel Schunk; Kirsten Winkel |
| Abstract: | Working memory capacity is a key component of executive functioning and is thought to play an important role for a wide range of cognitive and noncognitive skills such as fluid intelligence, math, reading, the inhibition of pre-potent impulses or more general self-regulation abilities. Because these abilities substantially affect individuals’ life trajectories in terms of health, education, and earnings, the question of whether working memory (WM) training can improve them is of considerable importance. However, whether WM training leads to spillover effects on these other skills is contested. Here, we examine the causal impact of WM training embedded in regular school teaching by a randomized educational intervention involving a sample of 6–7 years old first graders. We find substantial immediate and lasting gains in working memory capacity. In addition, we document positive spillover effects on geometry, Raven’s fluid IQ measure, and the ability to inhibit pre-potent impulses. Moreover, these spillover effects emerge over time and only become fully visible after 12–13 months. Finally, we document that three years after the intervention the children who received training have a roughly 16 percentage points higher probability of entering the academic track in secondary school. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11010&r=cbe |
| By: | Callen, Mike; Weigel, Jonathan; Yuchtman, Noam |
| Abstract: | We review an emerging experimental literature studying institutional change. Institutions are a key determinant of economic growth, but the “critical junctures” in which institutions can change are not precisely defined. For example, such junctures are often identified ex post, raising methodological problems: selection on the outcome of institutional change; an inability to study beliefs, central to coordination and thus the process of institutional change; and an inability to conduct experiments to identify causal effects. We argue that critical junctures are identifiable in real-time as moments when there exists deep uncertainty about future institutions. Consistent with this conception, the papers reviewed: (i) examine changes to institutions, i.e., the “fundamental rules of the game”; (ii) are real-time studies of plausible critical junctures; and, (iii) use field experiments to achieve causal identification. Substantively, this literature examines institutional changes in state capacity and legitimacy, political inclusion, and political accountability. We also advocate more systematic measurement of beliefs about future institutions to identify critical junctures as they happen and provide an empirical proof of concept. Such work is urgent given contemporary critical junctures arising from democratic backsliding, state fragility, climate change, and conflicts over the rights of the marginalized. |
| Keywords: | institutional change; critical junctures; field experiments; fragile states; belief elicitation |
| JEL: | P00 O10 D70 |
| Date: | 2023–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:122367&r=cbe |