nep-neu New Economics Papers
on Neuroeconomics
Issue of 2020‒08‒10
four papers chosen by

  1. Locus of Control, Savings and Propensity to Save By Bucciol, Alessandro; Trucchi, Serena
  2. Exploring psychological well-being and poverty dynamics in South-Africa: evidence from NIDS waves 1-5 By Nik Stoop; Murray Leibbrandt; Rocco Zizzamia
  3. Cognitive Droughts By Guilherme Lichand; Anandi Mani
  4. How Climate-Friendly Behavior Relates to Moral Identity and Identity-Protective Cognition: Evidence from the European Social Surveys By Heinz Welsch

  1. By: Bucciol, Alessandro (University of Verona, Department of Economics); Trucchi, Serena (Cardiff Business School)
    Abstract: We study the relationship between saving choices and a key psychological characteristic such as locus of control using data from a longitudinal survey representative of the Dutch population. Locus of control measures the extent to which individuals perceive their life outcomes to be determined by their own actions, as opposed to external factors. Our findings show that those who believe to be in control of future outcomes save more, both at the extensive (probability to save) and intensive margins (amount of savings). We also investigate the mechanisms behind the relationship. Locus of control may affect both the propensity to save for general purposes and savings to achieve a specific purchase goal (e.g. buying a house). We find that both channels are significant, the latter being more sizeable.
    Keywords: Locus of Control; Saving decisions; Propensity to save; Mediation analysis.
    JEL: D14 D91
    Date: 2020–07
  2. By: Nik Stoop (Southern Africa Labour and Development Research Unit, University of Cape Town, South Africa. Institute of Development Policy, University of Antwerp, Belgium and Centre for Institutions and Economic Performance, University of Leuven, Belgium); Murray Leibbrandt (Southern Africa Labor and Development Research Unit, University of Cape Town. ARUA's African Centre of Excellence for Inequality Research, SALDRU, University of Cape Town.); Rocco Zizzamia (Southern Africa Labor and Development Research Unit, University of Cape Town. ARUA's African Centre of Excellence for Inequality Research, SALDRU, University of Cape)
    Abstract: The mechanisms that perpetuate poverty are still not well understood. An emerging literature focuses on the psychology of poverty, investigating psychological and behavioral factors that may affect poverty entry and make it difficult to escape poverty. This paper explores the relationship between psychological well-being and poverty in South Africa. We rely on Waves 1-5 of the National Income Dynamics Study (NIDS), a nationally representative household panel survey that spans a decade. A descriptive analysis shows a strong negative correlation between psychological well-being and per capita household expenditure, with individuals in lower expenditure deciles displaying significantly higher risks of depression and lower levels of life satisfaction. To identify causal effects, we turn to an econometric framework that accounts for endogenous initial poverty conditions, unobserved heterogeneity and non-random panel attrition. Preliminary results suggest that the risk of poverty significantly increases as psychological well-being deteriorates, and the other way around. We discuss a range of avenues for follow-up research.
    Date: 2019
  3. By: Guilherme Lichand; Anandi Mani
    Abstract: Poverty involves both low income levels and high income uncertainty. Do both these dimensions of being poor capture attention in ways that distort decision-making and trap people in poverty? We examine these issues using real-life shocks faced by farmers in Brazil: random payday variation affecting income levels, and rainfall shocks that affect income uncertainty. We find that it is income uncertainty that systematically has adverse cognitive effects; low income levels affect only the poorest households. The net adverse impacts on cognitive function prevail even though both dimensions of poverty reallocate attention to scarce-resource tasks. These results broaden our understanding of the impacts of uncertainty by exploring a psychological channel distinct from risk aversion, and help reconcile apparently contradictory evidence on the cognitive impact of poverty in previous studies.
    Keywords: Uncertainty; Attention; Psychology of poverty; Scarcity;
    JEL: D81 D91 I32
    Date: 2020
  4. By: Heinz Welsch (University of Oldenburg, Department of Economics)
    Abstract: The paper studies the role for climate-friendly behavior of individuals’ moral identity, conceptualized in terms of the moral foundations identified by moral psychologists (Care, Fairness, Liberty, Loyalty, Authority, and Sanctity). Two channels of influence are distinguished: a direct influence of moral identity at given cognitions of climate change impacts and effectiveness of individual action, and an indirect influence through the effect of moral identity on these cognitions. Using data from the European Social Surveys, the paper finds that endorsement of the individual-focused (universalist) moral foundations (Care, Fairness, Liberty) and endorsement of the group-focused moral foundations (Loyalty, Authority, Sanctity) both foster climate friendly behavior through the direct channel, the former 1.5 times stronger than the latter. In addition, individual-focused moral foundations enhance climate-friendly behavior by fostering the cognition of bad impacts of climate change and of effectiveness of own action. The indirect effect amounts to up to one third of the direct effect. Results suggest that climate-friendly behavior is to a considerable extent a matter of moral factors rather than consequentialist (benefit-cost) considerations.
    Keywords: climate-friendly behavior; moral identity; climate change cognition; moral foundations
    Date: 2020–07

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