nep-neu New Economics Papers
on Neuroeconomics
Issue of 2021‒06‒14
four papers chosen by

  1. The Effect of Self-Control and Financial Literacy on Impulse Borrowing: Experimental Evidence By Antonia Grohmann; Jana Hamdan
  2. Covid-19 and Mental Health of Individuals with Different Personalities By Eugenio Proto; Anwen Zhang
  3. Does Overconfidence Lead to Bargaining Failures? By Luis Santos Pinto; Paola Colzani
  4. Children's patience and school-track choices several years later: Linking experimental and field data By Silvia Angerer; Jana Bolvashenkova; Daniela Glätzle-Rützler; Philipp Lergetporer; Matthias Sutter

  1. By: Antonia Grohmann; Jana Hamdan
    Abstract: This paper examines the effect of reduced self-control on impulsive borrowing in a laboratory experiment. We manipulate self-control using an ego depletion task and show that it is effective. Following the ego depletion task, participants can anonymously buy hot drinks on credit. We find no significant average effects, but find that treated individuals that have low financial literacy are more likely to borrow impulsively. We complement our experimental analysis with survey evidence that suggests that people with low self-control have more problems with the repayment of consumer debt. This relationship is, in line with the experimental results, weaker for individuals with high financial literacy.
    Keywords: Debt, consumption, borrowing, self-control, ego depletion
    JEL: D14 G51 C91
    Date: 2021
  2. By: Eugenio Proto; Anwen Zhang
    Abstract: Several studies have been devoted to establishing the effects of the Covid-19 pandemic on mental health across gender, age and ethnicity. However, much less attention has been paid to the differential effect of lockdown according to different personalities. We do this using the UKHLS longitudinal dataset, representative of the UK population. The UKHLS dataset allows us to assess the mental health of the same respondent during the Covid-19 period and the year before based on their personality "Big Five" traits and cognitive skills. We find that during the Covid-19 period individuals who have more Extrovert and Open personality report a higher mental health deterioration, while the ones scoring higher in Agreeableness are less affected. The effect of Openness is particularly strong: one more standard deviation predict one more symptom on the GHQ12 test for about 1 respondent over 4. In female respondents, Cognitive Skills and Openness are particularly strong predictors of deterioration. Neuroticism seems to predict more mental health deterioration, as it is normal to expect, but this effect is not significant in the main specifications of the estimated model. The study's results are robust to the inclusion of potential confounding variables such as changes in: physical health, household income and job status (like unemployed or furloughed).
    Keywords: Covid-19, Mental Health, Big 5, Cognitive Skills
    JEL: I3
    Date: 2021–05
  3. By: Luis Santos Pinto; Paola Colzani
    Abstract: We use a laboratory experiment to study the causal impact of self-confidence on bargaining with joint production. We exogenously manipulate the self-confidence of subjects regarding their relative performance by employing easy and hard tasks. Subjects are randomly matched into pairs and each pair bargains over a joint surplus which can be either high or low. The size of the joint surplus depends on the pair’s relative performance on the task. Our main experimental findings are as follows. First, the percentage of bargaining failures when subjects perform the easy task is more than triple than when they perform the hard task. Second, there is a remarkably high percentage of bargaining failures when subjects perform the easy task and bargain over a low surplus. Third, when subjects perform the easy task and bargain over a high surplus, all pairs reach an agreement and most settle on the equal split. Our findings shed light on the conditions and mechanisms under which overconfidence causes bargaining failures.
    Keywords: Overconfidence, Bargaining, Joint Production, Laboratory Experiment
    JEL: C79 C91 C92 D91
    Date: 2021–02
  4. By: Silvia Angerer; Jana Bolvashenkova; Daniela Glätzle-Rützler; Philipp Lergetporer; Matthias Sutter
    Abstract: We present direct evidence on the link between children's patience and educational-track choices years later. Combining an incentivized patience measure of 493 primary-school children with their high-school track choices taken at least three years later at the end of middle school, we find that patience significantly predicts choosing an academic track. This relationship remains robust after controlling for a rich set of covariates, such as family background, school-class fixed effects, risk preferences, and cognitive abilities, and is not driven by sample attrition. Accounting for middle-school GPA as a potential mediating factor suggests a direct link between patience and educational-track choice.
    Keywords: patience, education, school track choice, children, lab-in-the-field experiment
    JEL: C91 D90 I21 J2
    Date: 2021

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