nep-neu New Economics Papers
on Neuroeconomics
Issue of 2024‒02‒26
four papers chosen by

  1. Maternal Beliefs and Long-Term Child Skill Development By Greta Morando; Sonkurt Sen; Almudena Sevilla
  2. Recessions and the Labor Market Returns to Cognitive and Social Skills By Frisvold, David E.; Kim, Sun Hyung
  3. The Intersection of Financial Literacy, Cognitive Ability, and Numeracy Skills in Pakistani Adults By Siddiqi, Umema
  4. Complexity and Hyperbolic Discounting By Benjamin Enke; Thomas Graeber; Ryan Oprea; Thomas W. Graeber

  1. By: Greta Morando; Sonkurt Sen; Almudena Sevilla
    Abstract: Parental beliefs significantly inŕuence parental investment in children, yet their long-term impact on child development remains underexplored. We examine the enduring effects of a generalized maternal belief about returns on investment (Locus of Control, LoC) on child development by using a value-added model in a nationally-representative cohort study. Maternal LoC positively shapes socio-emotional skills from early childhood to adolescence, while it has null and milder impacts on cognitive skills and academic outcomes, respectively. The socio-economic gradient in maternal LoC contributes to socio-economic disparities in children’s socio-emotional development. Parental investment acts as a mechanism through which parental beliefs affect child development.
    Keywords: Parental beliefs, human capital development, locus of control, parental investment, socio-economic inequality
    JEL: D10 D91 J13 J24 I24
    Date: 2024–01
  2. By: Frisvold, David E. (University of Iowa); Kim, Sun Hyung (Shanghai University)
    Abstract: Although recessions negatively affect labor market outcomes, we find that individuals with greater cognitive skills have been less affected by recessions since 2000 compared to those in the 1980s and 1990s. This result occurs despite a decrease in the returns to cognitive skills over the last few decades, on average. We argue that changes in the provision of employer-paid training can help explain the relative return to cognitive skills during recent recessions due to lower training costs and enhanced labor productivity. Consistent with this, we find that firms provide more training to workers with higher cognitive skills during post-2000 recessions.
    Keywords: cognitive skills, social skills, training, recessions
    JEL: J01 J23 J24 J31 J60 J64
    Date: 2024–01
  3. By: Siddiqi, Umema
    Abstract: The evolution of complex financial products is changing the landscape of the global financial system and to make informed financial choices, one must equip themselves with at least the basic financial knowledge. Financial literacy is a life-skill that must be possessed by all. In this study we examine the impact of cognitive ability and numeracy skills on financial literacy among adults in Pakistan. An online survey was conducted from February to April 2022, and responses of 163 individuals were collected on questions relating to demographics, financial literacy, cognitive reflection, and numeracy skills. The results of the study reveal a positive relationship between financial literacy, numeracy skills, cognitive ability, and some socioeconomic characteristics. It was also found out that education, income, and employment status significantly influence financial literacy levels. These findings add to the existing literature on financial literacy and provide valuable insights for policymakers to design effective and targeted financial literacy programs, which also focus on improving numeracy and cognitive skills to enhance individuals' overall financial decision-making skills.
    Keywords: Financial literacy; numeracy; cognition.
    JEL: D14 D83 O16
    Date: 2023–06–04
  4. By: Benjamin Enke; Thomas Graeber; Ryan Oprea; Thomas W. Graeber
    Abstract: A large literature shows that people discount financial rewards hyperbolically instead of exponentially. While discounting of money has been questioned as a measure of time preferences, it continues to be highly relevant in empirical practice and predicts a wide range of real-world behaviors, creating a need to understand what generates the hyperbolic pattern. We provide evidence that hyperbolic discounting reflects mistakes that are driven by the complexity of evaluating delayed payoffs. In particular, we document that hyperbolicity (i) is strongly associated with choice inconsistency and cognitive uncertainty, (ii) increases in overt complexity manipulations and (iii) arises nearly identically in computationally similar tasks that involve no actual payoff delays. Our results suggest that even if people had exponential discount functions, complexity-driven mistakes would cause them to make hyperbolic choices. We examine which experimental techniques to estimate present bias are (not) confounded by complexity.
    Keywords: hyperbolic discounting, present bias, bounded rationality, cognitive uncertainty
    JEL: C91 D91 G00
    Date: 2023

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