nep-neu New Economics Papers
on Neuroeconomics
Issue of 2018‒01‒22
two papers chosen by
Daniel Houser
George Mason University

  1. Focusing and framing of risky alternatives By Dertwinkel-Kalt, Markus; Wenzel, Tobias
  2. Whistle While You Work: Job Insecurity and Older Workers' Mental Health in the United States By Italo A. Gutierrez; Pierre-Carl Michaud

  1. By: Dertwinkel-Kalt, Markus; Wenzel, Tobias
    Abstract: This paper develops a theory of focusing and framing in an intertemporal context with risky choices. We provide a selection criterion between existing theories of fo- cusing by allowing a decision maker to choose her frame such that her attention is either drawn to salient events associated with an option or to the expected utilities an option yields in different time periods. Our key assumption is that a decision maker can choose her frame in a self-serving manner. We predict that the selected frame induces overoptimistic actions in the sense that subjects underrate downside risk but overrate upside risk and accordingly reveal overoptimistic choices. Hence, our theory can explain phenomena such as excessive harmful consumption (smoking, unhealthy diet) and risky investments (entrepreneurship, lotteries, gambling) in one coherent framework. Notably, overoptimistic actions are not universal, but have plausible limits. We characterize under which situations overoptimistic actions are most likely to occur and under which circumstances choices should be rational or even pessimistic.
    Keywords: Focusing,Salience,Framing,Overoptimism
    JEL: D03 D11 D90
    Date: 2017
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:279&r=neu
  2. By: Italo A. Gutierrez; Pierre-Carl Michaud
    Abstract: We estimate the effects of job insecurity on older workers' health outcomes using an instrumental variables approach which exploits downsizing and state-industry level changes in employment. We provide evidence that job insecurity, as measured by the self-reported probability of job loss, increases stress at work, the risk of clinical depression and lowers self-reported health status. IV estimates are much larger than OLS estimates which we interpret as evidence that job insecurity which is outside the control of workers may have much larger effects on mental health. These findings suggest that employers ought to consider actions to offset the detrimental health effects of reducing personnel on their remaining (older) workers and pay attention at the stress that industry level changes in economic conditions may have on workers.
    Keywords: older workers, job insecurity, employer downsizing, health outcomes
    JEL: I12 M51
    Date: 2017
    URL: http://d.repec.org/n?u=RePEc:lvl:criacr:1702&r=neu

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