nep-neu New Economics Papers
on Neuroeconomics
Issue of 2021‒02‒08
seven papers chosen by

  1. The Causal Impact of Depression on Cognitive Functioning: Evidence from Europe By Nafilyan, Vahé; Pabon, Mauricio Avendano; de Coulon, Augustin
  2. Selection into entrepreneurship and self-employment By Ross Levine; Yona Rubinstein
  3. Selection and Causation in the Parental Education Gradient in Health: Lessons from a Large Sample of Adoptees By Evelina Björkegren; Mikael Lindahl; Mårten Palme; Emilia Simeonova
  4. Financial stress, cognition and vaccine use: Dual-processing and changes in risk preference. By Iles, Richard; Marsh, Thomas; Mwangi, Thumbi; Palmer, Guy
  5. Toward a Resolution of the St.Petersburg Paradox By Mamoru Kaneko
  6. Does Eye-Tracking Have an Effect on Economic Behavior? By Jennifer Kee; Melinda Knuth; Joanna Lahey; Marco A. Palma
  7. Online Belief Elicitation Methods By Valeria Burdea; Jonathan Woon

  1. By: Nafilyan, Vahé (London School of Hygiene & Tropical Medicine); Pabon, Mauricio Avendano (King's College London); de Coulon, Augustin (King's College London)
    Abstract: Cognitive skills are important determinants of employment and productivity in older adults. Although cognitive decline is often linked to changes in mental health, the causal nature of the association between mental illness and cognitive performance is not established. In this paper, we analyse the effect of depressive symptoms on cognitive function. Based on longitudinal data for older adults of working age, we use an instrumental variable approach to show that worsening depressive symptoms lead to a decline in cognitive skills. The economic consequences of impaired cognition caused by depressive symptoms may be a large component of mental illness's social costs.
    Keywords: cognitive skills, mental health, longitudinal data
    JEL: J24 I10
    Date: 2021–01
  2. By: Ross Levine; Yona Rubinstein
    Abstract: We study the effects of ability and liquidity constraints on entrepreneurship. We develop a three sector Roy model that differentiates between entrepreneurs and other self-employed to address puzzling gaps that have emerged between theory and evidence on entry into entrepreneurship. The model predicts—and the data confirm—that entrepreneurs are positively selected on highly-remunerated cognitive and non-cognitive human capital skills, but other self-employed are negatively selected on those same abilities; entrepreneurs are positively selected on collateral, but other self-employed are not; and entrepreneurship is procyclical, but self-employment is countercyclical.
    Keywords: entrepreneurship, human capital, occupational choice, corporate finance, business cycles
    JEL: L26 J24 G32 E32
    Date: 2020–10
  3. By: Evelina Björkegren; Mikael Lindahl; Mårten Palme; Emilia Simeonova
    Abstract: We use data from a large sample of adoptees born in Sweden to study to what extent the well-established association between parental educational attainments and adult health of the child generation can be attributed to pre- or post-birth factors, respectively. We find a significant association between the educational attainment of the adopting parents and child health outcomes as adults. These results suggest that growing up in a better-educated household has long-term effects on health outcomes. Our analysis of the mechanisms behind the results suggests that formation of human capital, and in particular cognitive and non-cognitive skills, may be important.
    JEL: I1 I12 I14 I26
    Date: 2020–12
  4. By: Iles, Richard (Washington State University); Marsh, Thomas (Washington State University); Mwangi, Thumbi (Washington State University); Palmer, Guy (Washington State University)
    Abstract: Decision-making in economics is largely framed by notions of risk preferences, consumption smoothing and stochastic changes in discounting. However, more recent empirical evidence indicates that direct measures of cognitive processes provide a more nuanced and predictively robust understanding of economic decision-making. The theoretical link between financial stress, changes in cognitive capacity and economic decision-making has become clearer due to the strong association between cognition and dual-processing theory. A need exists to better understand the potentially dynamic role of cognition on economic decision-making, particularly in low-income settings where poverty and associated financial stress are most prevalent. A short, unbalanced panel is used to estimate the effects of changing financial stress on household livestock expenditure in rural Kenya. Estimated negative changes in heuristic use on changes in livestock and educational expenditure provide further empirical evidence of the effect of changes in cognition on economic decision-making.
    Keywords: Poverty; cognition; heuristics; livestock; Kenya
    JEL: D91 I12 I32
    Date: 2019–06–12
  5. By: Mamoru Kaneko (Emeritus Professor, Waseda University and University of Tsukuba)
    Abstract: We study the St.Petersburg paradox from the viewpoint of bounded intelligence. Following Llyod Shapley, we reformulate its coin-tossing gamble introducing a finite budget of the banker, while this is as a resolution in the narrow sense as long as the standard expected reward criterion is adopted. It is still impossible for both banker and people to participate and to generate positive profits. We introduce cognitive bounds to people to modify the expected reward criterion and show that many people are incomparable to between participation and not. This is a rationalistic though people have cognitive bounds, and we take one more step of going to semi-rationalistic behavioral-probability for incomparable alternatives. This shows that some people show positive probabilities of participation in the coin-tossing with a fee producing positive profits for the banker. The last part is formulated as a monopoly market and its activeness is shown by the Mote Carlo simulation method.
    Keywords: St.Petersburg Paradox; Shapley's Modification; Expected Utility Theory with Probability Grids; Cognitive Bounds; Bounded Intelligence; Incomparability; behavioralprobability; Monte Carlo Method
    Date: 2020–10
  6. By: Jennifer Kee; Melinda Knuth; Joanna Lahey; Marco A. Palma
    Abstract: Eye-tracking is becoming an increasingly popular tool for understanding the underlying behavior driving economic decisions. However, an important unanswered methodological question is whether the use of an eye-tracking device itself induces changes in the behavior of experiment participants. We study this question using eight popular games in experimental economics. We implement a simple design where participants are randomly assigned to either a control or an eye-tracking treatment condition. In seven of the eight games, eye-tracking did not produce different outcomes. In the Holt and Laury risk assessment (HL), subjects with multiple calibration attempts behave like outliers under eye-tracking conditions, skewing the overall results. Further exploration shows that poor calibrators also show marginally higher levels of negative emotion, which is correlated with higher risk aversion in both HL and in the Eckel and Grossman gambling tasks. Because difficulty calibrating is correlated with eye-tracking data quality, the standard practice of removing participants who did not have good eye-tracking data quality resulted in no difference between the treatment and control groups in HL. Our results suggest that experiments may incorporate eye-tracking equipment without inducing changes in the economic behavior of participants, particularly after observations with low eye-tracking quality are removed.
    JEL: C9 D03 D8
    Date: 2020–12
  7. By: Valeria Burdea; Jonathan Woon
    Abstract: We evaluate the quality of beliefs elicited from online respondents, comparing several characteristics of two widely used elicitation mechanisms (the Binarized Scoring Rule - BSR - and a stochastic variation of the Becker-deGroot-Marshak mechanism -BDM) against a flat fee baseline for a variety of beliefs (induced probabilities, first-order factual knowledge, second-order knowledge of others). We find the flat-fee method is the most time-efficient, the BDM is the most difficult to understand, and there are no differences in the average accuracy of induced beliefs across conditions. However, the methods are significantly different in terms of the frequency of first-order and second-order beliefs reported at exactly 50%: the flat-fee method leads to the most mass on this belief, followed by BDM and BSR. We also find that incentives increase accuracy for less-educated participants, and that attention, numeracy, and education are positively associated with the quality of induced beliefs across methods. Our results suggest that the quality of beliefs elicited in online environments may depend less on the formal incentive compatibility properties of the elicitation procedure (whether the procedure prevents “dishonest” reporting) than on the difficulty of comprehending the task and how well incentives induce cognitive effort (thereby inducing subjects to quantify or construct their beliefs).
    Keywords: belief elicitation, incentives, online experiment
    JEL: C81 C89 D83 D91
    Date: 2021

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