nep-neu 2024-06-24 papers

on Neuroeconomics

Issue of 2024‒06‒24
two papers chosen by

Bad Luck or Bad Decisions? Macroeconomic Implications of Persistent Heterogeneity in Cognitive Skills and Overconfidence By Oliver Pfäuti; Fabian Seyrich; Jonathan Zinman
Birth order and transition into adulthood in Madagascar By Francesca Marchetta; Claire Ricard

Bad Luck or Bad Decisions? Macroeconomic Implications of Persistent Heterogeneity in Cognitive Skills and Overconfidence

By:	Oliver Pfäuti; Fabian Seyrich; Jonathan Zinman
Abstract:	Business cycle models often abstract from persistent household heterogeneity, despite its potentially significant implications for macroeconomic fluctuations and policy. We show empirically that the likelihood of being persistently financially constrained decreases with cognitive skills and increases with overconfidence thereon. Guided by this and other micro evidence, we add persistent heterogeneity in cognitive skills and overconfidence to an otherwise standard HANK model. Overconfidence proves to be the key innovation, driving households to spend instead of precautionary save and producing empirically realistic wealth distributions and hand-to-mouth shares and MPCs across the income distribution. We highlight implications for various fiscal policies.
Keywords:	Household heterogeneity, cognitive skills, overconfidence, financial constraints, fiscal policy, HANK
JEL:	D91 E21 E62 E71 G51
Date:	2024
URL:	http://d.repec.org/n?u=RePEc:diw:diwwpp:dp2080&r=

Birth order and transition into adulthood in Madagascar

By:	Francesca Marchetta (CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Claire Ricard (IDinsight, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
Abstract:	Using panel data from Madagascar, we study how birth order influences the transition into adulthood. We find that earlier borns drop school at a younger age, attain less schooling, and thus have lower cognitive skills than later borns. They also start working out of the family firm earlier and girls marry younger. The precocious transition of the firstborn is likely to finance younger siblings' education. These mechanisms are stronger in rural areas, where the liquidity constraints are stronger. Results are robust to different specifications commonly used in the birth order literature and are not sensitive to the presence of fostered children in the household.
Keywords:	Birth order, Educational attainment, Age at marriage, Transition into adulthood, Liquidity constraint
Date:	2024–06–03
URL:	https://d.repec.org/n?u=RePEc:hal:cdiwps:hal-04598699&r=

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