nep-neu New Economics Papers
on Neuroeconomics
Issue of 2023‒06‒26
three papers chosen by

  1. Multidimensional cognitive ability, intermediate channels, and financial outcomes By Simion, Ștefania; Sulka, Tomasz
  2. Cognitive constraints and economic incentives By D'Acunto, Francesco; Hoang, Daniel; Paloviita, Maritta; Weber, Michael
  3. Clean Air and Cognitive Productivity: Effect and Adaptation By Nikolai Cook, Anthony Heyes, Nicholas Rivers

  1. By: Simion, Ștefania; Sulka, Tomasz
    Abstract: In this paper, we examine which dimensions of cognitive ability are most predictive of key financial outcomes and what pathways could account for the observed relationships. We begin by proposing a conceptual framework that accounts for several plausible "channels" through which differences in cognitive ability might influence financial outcomes. Subsequently, we put the framework to test using the English Longitudinal Study of Ageing. We find that numeracy and literacy are strong predictors of different measures of wealth level and composition, after controlling for a rich set of demographic characteristics. We also find that our end-node channels, planning and self-control, have an even greater predictive power. Nevertheless, despite the fact that these channels are strongly correlated with both numeracy and literacy, they do not fully account for the pathways from cognitive ability to financial outcomes.
    Keywords: Cognitive Ability, Numeracy, Financial Literacy, Planning, Self-Control
    JEL: C13 D91 J14 J24
    Date: 2023
  2. By: D'Acunto, Francesco; Hoang, Daniel; Paloviita, Maritta; Weber, Michael
    Abstract: Unique administrative data on a representative population's cognitive abilities, spending, and financials reveal that consumers at or below median cognitive abilities barely react when their incentives to spend or borrow change, even if they earn high incomes and are financially unconstrained and conditional on formal education, personal and macroeconomic expectations, and rich demographics. Matched survey-based data on this population show that non-responsive consumers fail to grasp how the incentives to consume, save, and borrow change over time. Cognitive constraints limit the effectiveness of policies targeting household consumption and debt and might lead to regressive redistribution from low- to high-cognitive-ability consumers.
    Keywords: Behavioral Economics, Limited Cognition, Consumption, Borrowing, Heterogeneous Agents, Redistribution, Inequality
    JEL: D12 D91 E21 E52 G41 G51
    Date: 2023
  3. By: Nikolai Cook, Anthony Heyes, Nicholas Rivers (Wilfrid Laurier University)
    Abstract: We observe 1.8 million university course grades for 88, 959 adults who learn and complete examinations in a much less polluted environment than previously studied. We use a within-student identification strategy and find robust evidence of a negative and causal effect of exam-day outdoor air pollution on course performance. The effect of pollution persists beyond the same-day effect. Female students are more sensitive than males, and effects greatest when engaged in unfamiliar tasks. We explore two mar- gins of adaptation, one infrastructural, one behavioral. Working in a new building, and particularly if it is high quality (LEED Gold), provides significant mitigation. Relocating to a floor above ground-level also offers partial protection.
    Keywords: air pollution, cognitive function, particulate matter, productivity
    Date: 2023–01

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