New Economics Papers
on Neuroeconomics
Issue of 2012‒07‒14
three papers chosen by

  1. Hard Evidence on Soft Skills By James J. Heckman; Tim D. Kautz
  2. The Effect of Breastfeeding on Children's Cognitive and Noncognitive Development By Borra, Cristina; Iacovou, Maria; Sevilla-Sanz, Almudena
  3. A decision-theoretic model of asset-price underreaction and overreaction to dividend news By Alexander Ludwig; Alexander Zimper

  1. By: James J. Heckman; Tim D. Kautz
    Abstract: This paper summarizes recent evidence on what achievement tests measure; how achievement tests relate to other measures of "cognitive ability" like IQ and grades; the important skills that achievement tests miss or mismeasure, and how much these skills matter in life. Achievement tests miss, or perhaps more accurately, do not adequately capture, soft skills—personality traits, goals, motivations, and preferences—that are valued in the labor market, in school, and in many other domains. The larger message of this paper is that soft skills predict success in life, that they causally produce that success, and that programs that enhance soft skills have an important place in an effective portfolio of public policies.
    JEL: D01 I20
    Date: 2012–06
  2. By: Borra, Cristina (University of Seville); Iacovou, Maria (University of Essex); Sevilla-Sanz, Almudena (Queen Mary, University of London)
    Abstract: This paper uses propensity score matching methods to investigate the relationship between breastfeeding and children's cognitive and noncognitive development. We find that breastfeeding for four weeks is positively and statistically significantly associated with higher cognitive test scores, by around one tenth of a standard deviation. The association between breastfeeding and noncognitive development is weaker, and is restricted to children of less educated mothers. We conclude that interventions which increase breastfeeding rates would improve not only children's health, but also their cognitive skills, and possibly also their noncognitive development.
    Keywords: breastfeeding
    JEL: I10 J0
    Date: 2012–06
  3. By: Alexander Ludwig (CMR, University of Cologne; Albertus-Magnus-Platz; 50923 Koln; Germany); Alexander Zimper (Department of Economics, University of Pretoria)
    Abstract: We combine new developments in decision theory with a standard consumption-based asset-pricing framework. In our model the efficient market hypothesis is violated if and only if agents' beliefs express ambiguity about the stochastic process driving economic fundamentals. Asset price fluctuations result because agents with ambiguous beliefs are prone to a confirmatory bias in the interpretation of new information. We demonstrate that our approach gives rise to price-patterns of "underreaction" and "overreaction" to news about dividend payments. Although these empirical phenomena have received significant attention in the behavioral finance literature, we argue that our decision-theoretic underpinning of psychological attitudes has a less ad hoc flavor than existing approaches.
    Keywords: Choquet Expected Utility Theory, Portfolio Choice, Asset Pricing Puzzles
    Date: 2012–06

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