nep-neu New Economics Papers
on Neuroeconomics
Issue of 2016‒08‒14
six papers chosen by

  1. Cognitive Droughts By Lichand, Guilherme; Mani, Anandi
  2. Achievement Goal and Life Satisfaction: The Mediating Role of Perception of Successful Agency and the Moderating Role of Emotion Reappraisal By Wang, Wangshuai; Li, Jie; Sun, Gong; Zhang, Xin-an; Cheng, Zhiming
  3. CEO Personality and Firm Policies By Ian D. Gow; Steven N. Kaplan; David F. Larcker; Anastasia A. Zakolyukina
  4. Social participation and self-rated psychological health By Fiorillo, Damiano; Lubrano Lavadera, Giuseppe; Nappo, Nunzia
  5. Heads or Tails: The Impact of a Coin Toss on Major Life Decisions and Subsequent Happiness By Steven D. Levitt
  6. Cognitive Performance and Labor Market Outcomes By Dajun Lin; Randall Lutter; Christopher J. Ruhm

  1. By: Lichand, Guilherme (Harvard University); Mani, Anandi (University of Warwick)
    Abstract: This paper tests whether uncertainty about future rainfall affects farmers’ decision-making through cognitive load. Behavioral theories predict that rainfall risk could impose a psychological tax on farmers, leading to material consequences at all times and across all states of nature, even within decisions unrelated to consumption smoothing, and even when negative rainfall shocks do not materialize down the line. Using a novel technology to run lab experiments in the field, we combine survey experiments with recent rainfall shocks to test the effects of rainfall risk on farmers’ cognition, and find that it decreases farmers’ attention, memory and impulse control, and increases their susceptibility to a variety of behavioral biases. Effects are quantitatively important, equivalent to losing 25% of one’s harvest at the end of the rainy season. Evidence that farmer’s cognitive performance is relatively less impaired in tasks involving scarce resources suggests that the effects operate through the mental bandwidth mechanism.
    Keywords: JEL Classification:
    Date: 2016
  2. By: Wang, Wangshuai; Li, Jie; Sun, Gong; Zhang, Xin-an; Cheng, Zhiming
    Abstract: Achievement goal is a cognitive representation that guides behavior to a competence-related future end state. Existing theories and empirical findings imply that achievement goal is potentially related to life satisfaction. However, the relationship between achievement goal and life satisfaction remains relatively unexplored in the psychology literature. In this study we examined how, and when, achievement goal affects life satisfaction, using original survey data from China. The results suggested that achievement goal was positively related to life satisfaction, that the perception of successful agency fully mediated the relationship between achievement goal and life satisfaction, and that emotion reappraisal moderated the relationship between achievement goal and life satisfaction. Our study helps reveal the positive influence of achievement goal on life satisfaction, and provides an understanding of the mechanism and boundary condition of this influence.
    Keywords: achievement goal, perception of successful agency, emotion reappraisal, life satisfaction
    JEL: I31 J28
    Date: 2016–08–04
  3. By: Ian D. Gow; Steven N. Kaplan; David F. Larcker; Anastasia A. Zakolyukina
    Abstract: Based on two samples of high quality personality data for chief executive officers (CEOs), we use linguistic features extracted from conferences calls and statistical learning techniques to develop a measure of CEO personality in terms of the Big Five traits: agreeableness, conscientiousness, extraversion, neuroticism, and openness to experience. These personality measures have strong out-of-sample predictive performance and are stable over time. Our measures of the Big Five personality traits are associated with financing choices, investment choices and firm operating performance.
    JEL: D22 D23 G3 G34
    Date: 2016–07
  4. By: Fiorillo, Damiano; Lubrano Lavadera, Giuseppe; Nappo, Nunzia
    Abstract: Although structural and cognitive social capital have been hypothesized to have positive influence on psychological health, few papers found positive correlation and causal relationship between social capital dimensions and psychological wellbeing. This longitudinal study investigates the effect of social participation in associations - member, active, member and active - on self-rated psychological health using five waves of the British Household Panel Survey that follows the same individuals between years 1991 and 1995. Self-rated psychological health is assessed by single items of the General Health Questionnaire (GHQ-12). Using ordered logit fixed effect methods the paper shows that being member and active in associations increases all “positive” items of self-rated psychological health and decreases two main “negative” items of psychological wellbeing.
    Keywords: Social capital, social participation, psychological health, ordered logit fixed effect, British Household Panel Survey
    JEL: C23 D71 I1 I3 Z1
    Date: 2016–08–03
  5. By: Steven D. Levitt
    Abstract: Little is known about whether people make good choices when facing important decisions. This paper reports on a large-scale randomized field experiment in which research subjects having difficulty making a decision flipped a coin to help determine their choice. For important decisions (e.g. quitting a job or ending a relationship), those who make a change (regardless of the outcome of the coin toss) report being substantially happier two months and six months later. This correlation, however, need not reflect a causal impact. To assess causality, I use the outcome of a coin toss. Individuals who are told by the coin toss to make a change are much more likely to make a change and are happier six months later than those who were told by the coin to maintain the status quo. The results of this paper suggest that people may be excessively cautious when facing life-changing choices.
    JEL: D12 D81
    Date: 2016–08
  6. By: Dajun Lin; Randall Lutter; Christopher J. Ruhm
    Abstract: We use information from the National Longitudinal Survey of Youth 1979 (NLSY79) and supplementary data sources to examine how cognitive performance, measured at approximately the end of secondary schooling, is related to the labor market outcomes of 20 through 50 year olds. Our estimates control for a wide array of individual and family background characteristics, a limited set of non-cognitive attributes, survey year dummy variables and, sometimes, geographic place effects. The analysis reveals five main findings. First, cognitive performance is positively associated with future labor market outcomes at all ages. The relationship is attenuated but not eliminated by the addition of controls for non-cognitive characteristics, while the inclusion of place effects does not change the estimated associations. Second, the returns to cognitive skill increase with age. Third, the effect on total incomes reflects a combination of positive impacts of cognitive performance for both hourly wages and annual work hours. Fourth, the returns to cognitive skill are greater for women than men and for blacks and Hispanics than for non-Hispanic whites, with differential effects on work hours being more important than corresponding changes in hourly wages. Fifth, the average gains in lifetime incomes predicted to result from greater levels of cognitive performance are only slightly above those reported in prior studies but the effects are heterogeneous, with larger relative and absolute increases, in most models, for nonwhites or Hispanics than for non-Hispanic whites, and higher relative but not absolute returns for women than men.
    JEL: J23 J24 J31 J38
    Date: 2016–07

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