nep-neu New Economics Papers
on Neuroeconomics
Issue of 2021‒08‒30
four papers chosen by

  1. Buying Control? ‘Locus of Control’ and the Uptake of Supplementary Health Insurance By Eric Bonsang; Joan Costa-Font; Sonja De New; Joan Costa-i-Font
  2. Is Being Competitive Always an Advantage? Degrees of Competitiveness, Gender, and Premature Work Contract Termination By Samuel Lüthi; Stefan C. Wolter
  3. Complexity and Choice By Yuval Salant; Jörg L. Spenkuch
  4. Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence By Hermo, Santiago; Päällysaho, Miika; Seim, David; Shapiro, Jesse

  1. By: Eric Bonsang; Joan Costa-Font; Sonja De New; Joan Costa-i-Font
    Abstract: This paper analyses the relationship between locus of control (LOC) and the demand for supplementary health insurance. Drawing on longitudinal data from Germany, we find robust evidence that individuals having an internal LOC are more likely to take up supplementary private health insurance (SUPP). The increase in the probability to have a SUPP due to one standard deviation increase in the measure of internal LOC is equivalent to an increase in household income by 14 percent. Second, we find that the positive association between self-reported health and SUPP becomes small and insignificant when we control for LOC, suggesting that LOC might be an unobserved individual trait that can explain advantageous selection into SUPP. Third, we find comparable results using data from Australia, which enhances the external validity of our results.
    Keywords: private health insurance, health care use, risk aversion, locus of control, positive selection, supplementary insurance, Germany, Australia
    JEL: I12 I13 I18 D15
    Date: 2021
  2. By: Samuel Lüthi; Stefan C. Wolter
    Abstract: In this study, we examine the influence of competitiveness on the stability of labour relations using the example of premature employment and training contract termination in the apprenticeship education sector. The paper extends the small but growing evidence on the external relevance of competitiveness by analysing gender differences in the correlation between competitiveness and labour market success and whether these effects depend on how the students’ propensity to compete is measured. By matching a large experimental dataset with administrative data identifying contract terminations, we find that both gender and test specification matter. While competitive men assigned to a difficult competitiveness task are less likely to drop out of the contract than non competitive men, there is no such effect observable for those assigned to the easier task. On the other hand, competitive women are more likely to drop out than non competitive women, irrespective of how competitiveness is measured.
    Keywords: competitiveness, non-cognitive skills, gender, apprenticeship
    JEL: C90 J16 J24
    Date: 2021
  3. By: Yuval Salant; Jörg L. Spenkuch
    Abstract: We study two dimensions of complexity that may interfere with individual choice. The first one is object complexity, which corresponds to the difficulty in evaluating any given alternative in a choice set. The second dimension is composition complexity, which increases when suboptimal alternatives become more similar to optimal ones. We develop a satisficing-with-evaluation-errors theory that incorporates both dimensions and delivers sharp empirical predictions about their effect on choice behavior. We confirm these predictions in a novel data set with information on hundreds of millions of decisions in chess endgames. First, as the object complexity of an optimal (suboptimal) alternative increases, it becomes less (more) likely to be chosen. Second, even highly experienced decision-makers are more likely to make mistakes when choosing from sets with higher composition complexity. These findings help to shed some of the first light on the effect of complexity on choice behavior outside of the laboratory.
    Keywords: complexity, choice, satisficing, bounded rationality
    JEL: D91
    Date: 2021
  4. By: Hermo, Santiago (Brown University); Päällysaho, Miika (Dept. of Economics, Stockholm University); Seim, David (Dept. of Economics, Stockholm University); Shapiro, Jesse (Brown University)
    Abstract: A large literature in cognitive science studies the puzzling “Flynn effect” of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort’s mix of skills is determined by different skills’ relative returns in the labor market and by the technology for producing skills. We estimate the model using administrative data from Sweden. Combining data from exams taken at military enlistment with earnings records from the tax register, we document an increase in the relative labor market return to logical reasoning skill as compared to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 36 percent of the measured increase in reasoning skill, and can also explain the decline in knowledge. An original survey of parents, an analysis of trends in school curricula, and an analysis of occupational characteristics show evidence of increasing emphasis on reasoning as compared to knowledge.
    Keywords: Flynn effect; IQ; skill investment; human capital; administrative data
    JEL: J24 J31 O52
    Date: 2021–08–23

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