New Economics Papers
on Neuroeconomics
Issue of 2011‒02‒12
two papers chosen by

  1. Maternal Input Choices and Child Cognitive Development: Testing for Reverse Causality By Zafar Nazarov
  2. Ellsberg Paradox and Second-order Preference Theories on Ambiguity: Some New Experimental Evidence By Yang, Chun-Lei; Yao, Lan

  1. By: Zafar Nazarov
    Abstract: This paper assesses whether the results of child achievement tests affect maternal employment and the child-care choices of mothers with prekindergarten children. To test this hypothesis, it first incorporates into Bernal and Keane's (2010) model the mother's imperfect knowledge of the child's cognitive ability endowment and possible mechanisms through which the mother may learn the child's endowment. Then it uses a quasi-structural approach to form approximations to the mother's employment and child-care decision rules and jointly estimate them with the child cognitive development production function and wage equation. Using a sample of single mothers from the NLSY79, it finds evidence that maternal employment and child-care decisions are sensitive to past achievement scores. In particular, a mother whose child has taken the Peabody Picture Vocabulary Test before entering kindergarten and whose child's standardized test score is above a certain threshold intends to use child care more and work more part-time hours immediately after observing the child's performance on the achievement test.
    JEL: C23 J13 J22
    Date: 2010–11
  2. By: Yang, Chun-Lei; Yao, Lan
    Abstract: We study the two-color problem by Ellsberg (1961) with the modification that the decision maker draws twice with replacement and a different color wins in each draw. The 50-50 risky urn turns out to have the highest risk conceivable among all prospects including the ambiguous one, while all feasible color distributions are mean-preserving spreads to one another. We show that the well-known second-order sophisticated theories like MEU, CEU, and REU as well as Savage’s first-order theory of SEU share the same predictions in our design, for any first-order risk attitude. Yet, we observe that substantial numbers of subjects violate the theory predictions even in this simple design.
    Keywords: Ellsberg paradox; Ambiguity; Second-order risk; Second-order preference theory; Experiment
    JEL: D81 C91
    Date: 2011–01–22

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.