New Economics Papers
on Neuroeconomics
Issue of 2010‒12‒04
three papers chosen by

  1. The intergenerational transmission of cognitive and non-cognitive abilities By Grönqvist, Erik; Öckert, Björn; Vlachos, Jonas
  2. Behavioral biases and cognitive reflection By Eva I. Hoppe; David J. Kusterer
  3. Joint measurement of risk aversion, prudence and temperance By Sebastian Ebert; Daniel Wiesen

  1. By: Grönqvist, Erik (IFAU - Institute for Labour Market Policy Evaluation); Öckert, Björn (FAU - Institute for Labour Market Policy Evaluation); Vlachos, Jonas (Department of Economics, Stockholm University)
    Abstract: We study the intergenerational transmission of cognitive and non-cognitive abilities between parents and sons using population-wide enlistment data. Conscripts are eva-luated at the same age and with comparable methods across cohorts, and we correct for measurement error bias in fathers’ ability measures by using their brothers’ abilities as instruments. The “uncle instrument” is supported by a host of validity tests. This strat-egy also enables us to predict mothers’ abilities. Our results suggest that previous esti-mates of intergenerational ability correlations are biased downwards; in particular for non-cognitive skills. When this bias is corrected for the non-cognitive correlation is close to that of cognitive abilities. Using predicted abilities, we further find the mother-son cognitive ability correlation to be stronger than the father-son correlation. Finally, educational attainment and labor market outcomes of both sons and daughters are found to be strongly related to both parents’ cognitive and non-cognitive abilities.
    Keywords: Intergenerational ability correlations; cognitive ability; non-cognitive ability; measurement error bias
    JEL: J13 J24
    Date: 2010–11–11
  2. By: Eva I. Hoppe; David J. Kusterer
    Abstract: In a large-scale laboratory experiment, we investigate whether subjects' scores on the cognitive reflection test (CRT) are related to their susceptibility to the base rate fallacy, the conservatism bias, overconfidence, and the endowment effect.
    Keywords: Cognitive reflection test, Base rate fallacy, Conservatism, Overconfidence, Endowment effect
    JEL: C91 D80 J24
    Date: 2010–07–28
  3. By: Sebastian Ebert; Daniel Wiesen
    Abstract: We propose a method to measure the intensity of risk aversion, prudence (downside risk aversion) and temperance (outer risk aversion) in experiments. Higher-order risk compensations are defined within the proper risk apportionment model of Eeckhoudt and Schlesinger [American Economic Review, 96 (2006) 280] that are elicited using a multiple price list format. This approach is not based on expected utility theory. In our experiment we find evidence for risk aversion, prudence and temperance. Women demand higher risk compensations for all orders. The highest compensation is demanded for taking downside risk, not for being (second order) risk-loving. This highlights the importance of prudence when considering economic decisions under risk.
    Keywords: Decision making under risk, laboratory experiment, prudence, risk aversion, temperance, gender differences
    JEL: C91 D81
    Date: 2010–11

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