nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒01‒24
thirty papers chosen by
Daniel Houser
George Mason University

  1. The Importance of Emotions for the Effectiveness of Social Punishment By Astrid Hopfensitz; Ernesto Reuben
  2. Altruism or Artefact? A Note on Dictator Game Giving By Nicholas Bardsley
  3. Ostracism and the Provision of a Public Good, Experimental Evidence By Frank P. Maier-Rigaud; Peter Martinsson; Gianandrea Staffiero
  4. Heterogeneous social preferences and the dynamics of free riding in public goods By Urs Fischbacher; Simon Gächter
  5. An Economic Anatomy of Culture: Attitudes and Behaviour in Inter- and Intra-National Ultimatum Game Experiments By Swee-Hoon Chuah; Robert Hoffmann; Martin Jones; Geoffrey Williams
  6. The Role of Equality and Efficiency in Social Preferences By Fehr, Ernst; Naef, Michael; Schmidt, Klaus M.
  7. Fairness and the Optimal Allocation of Ownership Rights By Fehr, Ernst; Kremhelmer, Susanne; Schmidt, Klaus M.
  8. Collusion in Growing and Shrinking Markets: Empirical Evidence from Experimental Duopolies By KLAUS ABBINK; JORDI BRANDTS
  9. Choice Under Uncertainty in Developing Countries By Glenn Harrison; Steven Humphrey; Arjan Verschoor
  10. Experientia Docet: Professionals Play Minimax in Laboratory Experiments By Ignacio Palacios-Huerta; Oscar Volij
  11. Fundraising through Competition: Evidence from the Lab By Henrik Orzen
  12. Are bygones bygones? By Robin Cubitt; Maria Ruiz-Martos; Chris Starmer
  13. Enlargement and the Balance of Power: an Experimental Study By Maria Montero; Martin Sefton; Ping Zhang
  14. How much is too much? - An investigation of the effect of the number of choice sets, starting point and the choice of bid vectors in choice experiments By Carlsson, Fredrik; Martinsson, Peter
  15. Determinants of Revolt: Evidence from Survey and Laboratory Data By KLAUS ABBINK; SILVIA PEZZINI
  16. The Syr Darya River Conflict: An Experimental Case Study By KLAUS ABBINK; MOLLER, Lars Christian; SARAH O’HARA
  17. Can intertemporal choice experiments elicit time preferences for consumption? By Robin Cubitt; Daniel Read
  18. Strategic Behavior and Learning in Repeated Voluntary-Contribution Experiments By Laurent Muller; Martin Sefton; Richard Steinberg; Lise Vesterlund
  19. Option Pricing by Students and Professional Traders: A Behavioural Investigation By KLAUS ABBINK; BETTINA ROCKENBACH
  20. Bribery and Public Procurement - An Experimental Study By Susanne Büchner; Andreas Freytag; Luis G. Gonzalez; Werner Güth
  21. Concentration and Competition: An Experiment By Henrik Orzen
  22. Implementing the Efficient Auction: Initial Results from the Lab By Shogren, Jason; Margolis, Michael
  23. Testing for feedback-conditional regret effects using a natural lottery By Steven Humphrey; Paul Mann; Chris Starmer
  24. The Experimetrics of Public Goods: Inferring Motivations from Contributions By Nicholas Bardsley; Peter Moffatt
  25. fairness: a survey By Ottone, Stefania
  27. The Swing Voter's Curse in the Laboratory By Marco Battaglini; Rebecca Morton; Thomas Palfrey
  28. Social memory, social stress, and economic behaviors By Taiki Takahashi
  29. Effort and comparison income: Survey and experimental evidence. By Andrew E. Clark; David Masclet; Marie-Claire Villeval
  30. Neighborhoods and Academic Achievement: Results from the Moving to Opportunity Experiment By Lisa Sanbonmatsu; Jeffrey R. Kling; Greg J. Duncan; Jeanne Brooks-Gunn

  1. By: Astrid Hopfensitz (Faculty of Economics and Econometrics, University of Amsterdam); Ernesto Reuben (Faculty of Economics and Econometrics, University of Amsterdam)
    Abstract: This paper experimentally explores how the enforcement of cooperative behavior in a social dilemma is facilitated through institutional as well as emotional mechanisms. Recent studies emphasize the importance of negatively valued emotions, such as anger, which motivate individuals to punish free riders. However, these types of emotions also trigger retaliatory behavior by the punished individuals. This makes the enforcement of a cooperative norm more costly. We show that in addition to anger, ‘social’ emotions like shame and guilt need to be present for punishment to be an effective deterrent of uncooperative actions. They play a key role by subduing the desire of punished individuals to retaliate and by motivating them to behave more cooperatively in the future.
    Keywords: Emotions; Punishment; Retaliation; Counter punishment; Social Norms; Fairness; Cooperation
    JEL: Z13 C92 D74 H41
    Date: 2005–08–02
  2. By: Nicholas Bardsley (CeDEx, Nottingham School of Economics, University of Nottingham)
    Abstract: Experimental dictator games have been used to explore unselfish behaviour. Evidence is presented here, however, that subjects’ generosity can be reversed by allowing them to take money from a partner. Dictator game giving therefore does not stem from orthodox social preferences. It can be interpreted plausibly as an artefact of experimentation. Alternatively the evaluation of an action depends on the composition of the choice set. Implications of these possibilities are explored for experimental methodology and charitable donations respectively. The artefact interpretation is empirically superior, and implies that researchers should investigate demand characteristics of experimental protocols.
    Keywords: altruism, artificiality, experiments, methodology
    JEL: C91 C70 D63 D64
    Date: 2005–04
  3. By: Frank P. Maier-Rigaud (Max Planck Institute for Research on Common Goods and Department of Economics, University of Bonn); Peter Martinsson (Department of Economics, Göteborg University); Gianandrea Staffiero (IESE Business School, University of Navarra)
    Abstract: We analyze the effects of ostracism on cooperation in a linear public good experiment. Our results show that introducing ostracism increases contributions. Despite reductions in group size due to ostracism, the net effect on earnings is positive and significant.
    Keywords: Experiment, Public Good, Ostracism
    JEL: C92 H41
    Date: 2005–11
  4. By: Urs Fischbacher; Simon Gächter
    Abstract: We provide a direct test of the role of social preferences in voluntary cooperation. We elicit individuals’ cooperation preference in one experiment and make a point prediction about the contribution to a repeated public good. This allows for a novel test as to whether there are "types" of players who behave consistently with their elicited preferences. We find clear-cut evidence for the existence of "types". People who express free rider preferences show the most systematic deviation from the predicted contributions, because they contribute in the first half of the experiment. We also show that the interaction of heterogeneous types explains a large part of the dynamics of free riding.
    Keywords: Public goods games, experiments, voluntary contributions, conditional cooperation, free riding
    JEL: C91 C72 H41 D64
    Date: 2005–12
  5. By: Swee-Hoon Chuah (Nottingham University Business School); Robert Hoffmann (Nottingham University Business School); Martin Jones (Department of Economic Studies, University of Dundee Nethergate); Geoffrey Williams (University of Nottingham Malaysia Campus)
    Abstract: The processes by which culture influences economic variables need to be exposed in order for the concept to be a useful tool for prediction and policy formulation. We investigate the attitudes and experimental behaviour of Malaysian and UK subjects to shed light on the nature of culture and the mechanisms by which it affects economic behaviour. Attitudinal dimensions of culture which significantly influence experimental game play are identified. This approach is offered towards a method to suitably quantify culture for economic analysis.
    Keywords: culture, ultimatum game, attitudes, world values survey, experiments
    JEL: C72 C91 D64 Z13
    Date: 2005–05
  6. By: Fehr, Ernst; Naef, Michael; Schmidt, Klaus M.
    Abstract: Engelmann and Strobel (AER 2004) question the relevance of inequity aversion in simple dictator game experiments claiming that a combination of a preference for efficiency and a Rawlsian motive for helping the least well-off is more important than inequity aversion. We show that these results are partly based on a strong subject pool effect. The participants of the E&S experiments were undergraduate students of economics and business administration who self-selected into their field of study (economics) and learned in the first semester that efficiency is desirable. We show that for non-economists the preference for efficiency is much less pronounced. We also find a non-negligible gender effect indicating that women are more egalitarian than men. However, perhaps surprisingly, the dominance of equality over efficiency is unrelated to political attitudes.
    Keywords: inequity aversion; preferences for efficiency; social preferences
    JEL: C7 C91 C92 D63 D64
    Date: 2005–12
  7. By: Fehr, Ernst; Kremhelmer, Susanne; Schmidt, Klaus M.
    Abstract: We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.
    Keywords: double moral hazard; fairness; incomplete contracts; ownership rights; reciprocity
    JEL: C7 C9 J3
    Date: 2005–12
  8. By: KLAUS ABBINK (University of Nottingham); JORDI BRANDTS (Institut d'Anàlisi Econòmica (CSIC), Barcelona)
    Abstract: We study collusive behaviour in experimental duopolies that compete in prices under dynamic demand conditions. In one treatment the demand grows at a constant rate. In the other treatment the demand declines at another constant rate. The rates are chosen so that the evolution of the demand in one case is just the reverse in time than the one for the other case. We use a box-design demand function so that there are no issues of finding and co-ordinating on the collusive price. Contrary to game-theoretic reasoning, our results show that collusion is significantly larger when the demand shrinks than when it grows. We conjecture that the prospect of rapidly declining profit opportunities exerts a disciplining effect on firms that facilitates collusion and discourages deviation.
    Keywords: Laboratory experiments, industrial organisation, oligopoly, price competition, collusion
    JEL: C90 C72 D43 D83 L13
    Date: 2005–02
  9. By: Glenn Harrison (Department of Economics, College of Business Administration, University of Central Florida); Steven Humphrey (School of Economics, University of Nottingham); Arjan Verschoor (School of Development Studies, University of East Anglia)
    Abstract: We review experimental evidence collected from risky choice experiments using poor subjects in Ethiopia, India and Uganda. Using these data we estimate that just over 50% of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory. Our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately. However, when we allow both models to explain portions of the data simultaneously, we infer risk aversion for subjects behaving according to expected utility theory and risk seeking behavior for subjects behaving according to prospect theory. We conclude that the current practice of designing policies under the assumption that one or other explains all behavior is fundamentally flawed.
    Keywords: choice under uncertainty, field experiments, developing countries
    JEL: O12 D81 C93
    Date: 2005–10
  10. By: Ignacio Palacios-Huerta; Oscar Volij
    Date: 2006–01–13
  11. By: Henrik Orzen (University of Nottingham)
    Abstract: This paper investigates fundraising mechanisms for the private provision of a public good which utilize competition as an incentive device for contributions. Theory predicts that “all-pay” competition is particularly effective for fundraising. Within this class of mechanisms different types of lotteries and all-pay auctions are analyzed and ranked. Three all-pay competition mechanisms are then examined in a laboratory experiment vis-à-vis a voluntary contribution mechanism (VCM). All three outperform the VCM and fully efficient outcomes are attained in the last-price all-pay auction after some learning has taken place.
    Keywords: Public Goods; Provision Mechanisms; Experiments; Contests
    JEL: C72 C92
    Date: 2005–01
  12. By: Robin Cubitt (School of Economics, University of Nottingham); Maria Ruiz-Martos (School of Economics, University of Nottingham); Chris Starmer (School of Economics, University of Nottingham)
    Abstract: The paper reports an experiment which tests the principle of separability, i.e. that behaviour in a dynamic choice problem is independent of history and of unreachable eventualities. Although this is a standard principle of decision theory, it can be questioned on grounds suggested by non-expected utility models of choice under risk and by the psychology of affective influences on risk-taking. Our experimental design, which provides between-subjects tests of separability using three treatments in which the history preceding a decision is manipulated, is inspired by these concerns. But, we find no significant evidence of violation of separability.
    Keywords: Separability; history-independence; non-expected utility; risk and affect
    Date: 2005–11
  13. By: Maria Montero (School of Economics, University of Nottingham); Martin Sefton (School of Economics, University of Nottingham); Ping Zhang (School of Economics, University of Nottingham)
    Abstract: Many important decisions are taken according to weighted majority rule. Power indices predict that enlargement of the voting body may affect the balance of power between the original members even if their number of votes and the decision rule remain constant. Some of the existing voters may actually gain, a phenomenon known as the paradox of new members. We test for this effect using laboratory experiments. Participants propose and vote on how to divide a budget according to weighted majority voting rules, and we measure the voting power of a player by his average payoff in the experiment. By comparing voting power across voting bodies of varying size, we find empirical support for the paradox of new members. Our results also allow an assessment of the predictive performance of standard power indices.
    Keywords: voting, power indices, experiments, paradox of new members
    JEL: C70 C92
    Date: 2005–07
  14. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In a split sample design, we examine how the number of choice sets, design of the first choice set (starting point), and the choice of attribute levels in the cost attribute affect the precision in the elicited preferences in otherwise completely identical choice experiment surveys. These issues are investigated for Swedish households’ marginal willingness to pay to reduce power outages. Our results indicate that neither the number´of choice sets nor the starting point choice set has a significant impact on estimated marginal willingness to pay, while the effect was significant for theadditive scaling of the cost vector. At the end of the paper we discuss the implications of our results on future developments and applications of choice experiments. <p>
    Keywords: Attribute levels; choice experiment; complexity; length; power outages; starting point
    JEL: C25 C93 D12 Q41
    Date: 2006–01–19
  15. By: KLAUS ABBINK (University of Nottingham); SILVIA PEZZINI (London School of Economics, University of Namur)
    Abstract: This paper examines determinants of revolutionary behaviour. We study the role of freedom of communication, repression of opposition and the government’s selfishness. Combining econometric analysis of survey data with a laboratory experiment, we analyse how these factors affect preferences for revolt and revolutionary action. We introduce an experimental game capturing essential features of a dictatorship. The results show that the feeling that the government operates selfishly increases both revolutionary preferences and actions. Political repression and lack of communication freedom increase revolutionary attitudes but decrease actual opposition, consistent with the collective action problem faced by opposition to a dictatorship.
    Keywords: Conflict, revolutions, experimental economics, surveys
    JEL: C23 C92 D74 H11
    Date: 2005–02
  16. By: KLAUS ABBINK (School of Economics, University of Nottingham); MOLLER, Lars Christian (School of Economics, University of Nottingham); SARAH O’HARA (School of Geography, University of Nottingham)
    Abstract: With the disintegration of the USSR a conflict arose between Kyrgyzstan, Uzbekistan and Kazakhstan over the Syr Darya river. Upstream Kyrgyzstan operates the Toktogul reservoir which generates hydropower demanded mainly in winter for heating. Downstream Uzbekistan and Kazakhstan need irrigation water in summer, primarily to grow cotton. Regional agreements obliging Kyrgyzstan to high summer discharges in exchange for fossil fuel transfers in winter have generally been unsuccessful, notably due to lack of trust between the parties. Striving for self-sufficiency in irrigation water, Uzbekistan initiated new reservoir construction. This paper examines their economic impact. We report a laboratory experiment modelling the Syr Darya river scenario as a multi-round three-player trust game with non-binding contracts. Payoff schemes are estimated using real-life data. While basinwide efficiency maximisation requires regional cooperation, our results demonstrate that cooperation in the laboratory is hard to achieve. Uzbek reservoirs improve the likelihood of cooperation only weakly and their positive economic impact is limited to low-water years.
    Keywords: Central Asia, common-pool resources, conflict, dams, hydropower, irrigation, experimental economics, regional public goods, transboundary rivers, Syr Darya, trust games, water
    JEL: C72 C92 O53 Q25
    Date: 2005–07
  17. By: Robin Cubitt (School of Economics, University of Nottingham); Daniel Read (Durham Business School, University of Durham)
    Abstract: The paper considers the problems of interpreting subjects’ responses to laboratory intertemporal choice and matching tasks that arise from (i) the existence of capital markets outside the laboratory; (ii) the distinction between observable income and unobservable consumption. It distinguishes between three approaches to these problems that are identifiable in the literature: the straightforward view; the separation view; and the censored data view. It shows that none of these is fully satisfactory and discusses the resulting implications for intertemporal decision-making experiments.
    Keywords: Discount rates; elicitation of time preferences; intertemporal decision-making experiments
    JEL: C90 C91 D90 D91 D11 D12
    Date: 2005–07
  18. By: Laurent Muller (University of Nottingham); Martin Sefton (University of Nottingham); Richard Steinberg (IUPUI); Lise Vesterlund (University of Pittsburgh)
    Abstract: We present an experiment investigating why contributions decline in repeated public goods games. To distinguish between alternative explanations for this decrease we use a strategy method to elicit strategies in a simple two-stage public goods game. By repeating the game with new opponents participants have the opportunity to learn across games. We find that the behavior elicited using the strategy method is consistent with that of a direct response version of the game. Contributions in stage two are around 45% lower than contributions in stage one. While this pattern of declining contributions is robust across repetitions of the two-stage game, the participants’ strategies are not. Changes in individual strategies across successive repetitions sometimes increase and sometimes decrease stage-one contributions, on average contributions decrease by 7% per game. Thus experience with the game leads to an erratic and less pronounced deterioration in contributions, compared with the systematic and more marked deterioration generated by submitted strategies.
    Date: 2005–07
  19. By: KLAUS ABBINK (School of Economics, The University of Nottingham); BETTINA ROCKENBACH (Lehrstuhl fuer Mikrooekonomie, Universitaet Erfurt)
    Abstract: We compare the behaviour of students and professional traders from an influential German bank in an experiment involving financial options. The arbitrage free option price is independent of the probability distribution of the underlying asset. The experimental data uncover a probability dependent option valuation of the students, however, they learn to exploit more arbitrage as they gain experience. The professional traders exhibit a less probability sensitive valuation, but their overall performance is lower than the students’. We offer the explanation that the professional traders choose a more intuitive and less analytic pattern of behaviour than the students, despite their superior knowledge in financial market theory and practice. At real financial markets, traders are typically not confronted with given and known exact probability distributions, but they must rather rely on their intuitive calibration of the prospects.
    Keywords: Experiment, Option Pricing, Arbitrage, Bounded Rationality
    JEL: C91 G12 G14
    Date: 2005–07
  20. By: Susanne Büchner (Max-Planck-Institute for Economics); Andreas Freytag (University of Jena, Faculty of Economics); Luis G. Gonzalez; Werner Güth (Max-Planck-Institute for Economics)
    Abstract: A procurement contract is granted by a bureaucrat (the auctioneer) who is interested in a low price and a bribe from the provider. The optimal bids and bribes are derived based on an iid private cost assumption. In the experiment, bribes are negatively framed (betweensubjects treatment) to capture that society is better off if bribes are rare or low. Although bids are lower than predicted, behavior is qualitatively in line with the linear equilibrium prediction. When bribes generate a negative externality, there is a significant increase in the variability of the data.
    Keywords: Corruption, Procurement Auctions
    Date: 2006–01–15
  21. By: Henrik Orzen (University of Nottingham)
    Abstract: Recent theoretical research on oligopolistic competition suggests that prices may increase when more firms compete in a market. However, this finding is based on comparative-static analyses of static models, which overlook the possibility that sellers may be able to charge supra-competitive prices in a dynamic setting and that this is more likely to be sustained with fewer competitors. Previous laboratory evidence corroborating the comparative-static result was generated using a random matching protocol which retains much of the one-shot character of the theory. In a new experiment we reexamine the number effect in repeated markets and find that duopolists now post substantially higher prices, while average prices in quadropolies remain very similar. As a result, the predicted effect is not observed, and towards the end the reverse effect is observed.
    Keywords: Market Concentration, Experiments, Tacit Collusion
    JEL: C72 C92 D43
    Date: 2005–04
  22. By: Shogren, Jason; Margolis, Michael
    Abstract: The efficient auction is designed to induce truthful bidding for bidders with affiliated values. Herein we implement the auction in the lab, and observe that inexperienced people can bid systematically in this more complex environment, albeit yielding a flatter bid function than the truthful.
    Keywords: Key Words: auction, affiliation, experiments, valuation
    JEL: C9 D44
  23. By: Steven Humphrey (CeDEx, School of Economics, University of Nottingham); Paul Mann; Chris Starmer
    Abstract: We report the results of an experimental test for feedback-conditional regret effects using a naturally occurring gamble. The properties of this gamble are likely to engage decision-makers to a greater extent than conventional abstract laboratory gambles, and be more generally exhibited by real world objects of choice. We argue that this conveys a higher than typical degree of external validity on our findings. We observe that feedback on the outcome of foregone choices enhances the salience of regret as a decision motive.
    Keywords: regret theory, outcome feedback, natural lottery, external validity
    JEL: D81 C91
    Date: 2005–05
  24. By: Nicholas Bardsley (CeDEx, School of Economics, University of Nottingham); Peter Moffatt (School of Economics, University of East Anglia)
    Abstract: In public goods experiments, stochastic choice, censoring, and motivational heterogeneity allow experimentalists to differ over the extent of unselfishness, and whether it is reciprocal or altruistic. These problems are addressed econometrically by estimating a finite mixture model to isolate types, incorporating the two-limit Tobit model with tremble to accommodate censoring and errors. Most subjects act selfishly, but a substantial proportion are reciprocal with altruism playing only a marginal role. Isolating reciprocators enables a test of Sugden’s model of voluntary contributions, which is rejected because they display a selfserving bias.
    Keywords: voluntary contributions, reciprocity, altruism, tobit, finite mixture models, trembles
    JEL: C1 C9 H4
    Date: 2005–06
  25. By: Ottone, Stefania
    Abstract: In this paper I provide an excursus, as complete as I could, of the most important theoretical and experimental works concerning fairness. The aim is twofold. First of all, I want to underline the importance of the role played by experimental economics in testing and improving models on this topic. Secondly, I want to mention some evidence that, even for fair-minded people, economic factors such as competition and costs, still matter in their decisional process.
    Date: 2006–01
  26. By: Iris Bohnet (Kennedy School of Government, Harvard University); Benedikt Herrmann (School of Economics, University of Nottingham); Richard Zeckhauser (Kennedy School of Government, Harvard University)
    Abstract: This paper employs experiments to determine how effectively arrangements decreasing the expected cost of trust betrayal foster trust in three Gulf countries (Kuwait, Oman and the United Arab Emirates), and two Western countries (Switzerland and the United States). Our basic instrument elicits subjects’ minimum acceptable probabilities for trustworthiness that would make them just willing to trust. Trust proves more elastic to the likelihood and the cost of betrayal in the West than in the Gulf. Risk aversion and betrayal aversion contribute to this difference. The disparities between the West and the Gulf are driven more by men than by women.
    Keywords: Trust, betrayal aversion, gender differences, in-group preferences
    Date: 2005–09
  27. By: Marco Battaglini; Rebecca Morton; Thomas Palfrey
    Date: 2005–12–28
  28. By: Taiki Takahashi (Hokkaido University)
    Abstract: Social memory plays a pivotal role in social behaviors, from mating behaviors to cooperative behaviors based on reciprocal altruism. More specifically, social/person recognition memory is supposed, by behavioral-economic and game-theoretic analysis, to be required for tit- for-tat like cooperative behaviors to evolve under the N-person iterated prisonerfs dilemma game condition. Meanwhile, humans are known to show a social stress response during face-to-face social interactions, which might affect economic behaviors. Furthermore, it is known that there are individual differences in a social stress response, which might be reflected in individual differences in various types of economic behaviors, partially via different capacities of social memory. In the present study, we investigated the acute effects of social stress- induced free cortisol (a stress hormone) elevation on hippocampus- dependent social memory by utilizing the Trier social stress test (consisting of a public speech and a mental arithmetic task).We also examine the correlation between an economic behavior-related personality trait (i.e., general trust scale) and social stress-induced cortisol elevations. We found that (1) social stress acutely impairs social memory during social interaction and (2) interpersonal trust reduces social stress response. Together, interpersonal trust may modulate economic behaviors via stress hormonefs action on social cognition- related brain regions.
    Keywords: neuroeconomics, hormone, trust, game theory, social cognition, stress, social memory
    JEL: C9
    Date: 2005–12–27
  29. By: Andrew E. Clark; David Masclet; Marie-Claire Villeval
    Abstract: This paper combines ISSP survey data and experimental evidence from a gift-exchange game to determine the effect of status or relative income on work effort. We find a strong effect of others' incomes on individual effort decisions in both datasets. The individual's rank in the income distribution has a more powerful effect on effort than does others' average income, suggesting that comparisons are more ordinal than cardinal. We further show that, controlling for own income and income rank, the width of the relevant income distribution matters, with effort increasing in the distance from the bottom of the income distribution. Last, effort is also affected by comparisons over time: those who received higher income offers or had higher income rank in the past exert lower levels of effort for a given current income.
    Date: 2006
  30. By: Lisa Sanbonmatsu; Jeffrey R. Kling; Greg J. Duncan; Jeanne Brooks-Gunn
    Abstract: Families originally living in public housing were assigned housing vouchers by lottery, encouraging moves to neighborhoods with lower poverty rates. Although we had hypothesized that reading and math test scores would be higher among children in families offered vouchers (with larger effects among younger children), the results show no significant effects on test scores for any age group among over 5000 children ages 6 to 20 in 2002 who were assessed four to seven years after randomization. Program impacts on school environments were considerably smaller than impacts on neighborhoods, suggesting that achievement-related benefits from improved neighborhood environments are alone small.
    JEL: I28 I38
    Date: 2006–01

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