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on Neuroeconomics |
| By: | Greta Morando; Sonkurt Sen |
| Abstract: | Parental beliefs about the returns to investment play a key role in shaping how parents invest in their children, yet their long-term impact on child development is understudied. Using a valueadded model in a nationally representative cohort study, we find that maternal beliefs about returns to investment, as measured by locus of control, positively influence children’s socioemotional skills from early childhood to adolescence. These beliefs have a negligible impact on cognitive skills and academic outcomes. Parental investment emerges as a key channel in this relationship, suggesting that maternal beliefs primarily shape children’s non-cognitive development through differences in how parents engage with their children. We find that intergenerational inequality in child development is partly driven by the socio-economic gradient in maternal beliefs about the returns to investment. |
| Keywords: | Parental Beliefs, Child Development, Locus of Control, Inequality |
| JEL: | D10 D91 J13 J24 I24 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_498v2 |
| By: | Carlos Alos Ferrer; Johannes Buckenmaier; Michele Garagnani |
| Abstract: | Economic decisions are noisy due to errors and cognitive imprecision. Often, they are also systematically biased by heuristics or behavioral rules of thumb, creating behavioral anomalies which challenge established economic theories. The interaction of noise and bias, however, has been mostly neglected, and recent work suggests that received behavioral anomalies might be just due to regularities in the noise. This contribution formalizes the idea that decision makers might follow a mixture of rules of behavior combining cognitively- imprecise value maximization and computationally simpler shortcuts. The model delivers new testable predictions which we validate in two experiments, focusing on biases in probability judgments and the certainty effect in lottery choice, respectively. Our findings suggest that neither cognitive imprecision nor multiplicity of behavioral rules suffice to explain received patterns in economic decision making. However, jointly modeling (cognitive) noise in value maximization and biases arising from simpler, cognitive shortcuts delivers a unified framework which can parsimoniously explain deviations from normative prescriptions across domains. |
| Keywords: | Cognitive Imprecision, Strength of Preference, Noise, Decision Biases, Belief Updating, Certainty Heuristic |
| JEL: | D01 D81 D87 D91 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:lan:wpaper:423483206 |
| By: | Vikesh Amin (Central Michigan University); Jere R. Behrman (University of Pennsylvania); Jason M. Fletcher (University of Wisconsin-Madison, IZA, and NBER); Carlos A. Flores (California Polytechnic State University); Alfonso Flores-Lagunes (W.E. Upjohn Institute for Employment Research, IZA, and GLO); Hans-Peter Kohler (University of Pennsylvania) |
| Abstract: | We revisit much-investigated relationships between schooling and health, focusing on schooling impacts on cognitive abilities at older ages using the Harmonized Cognition Assessment Protocol in the Health & Retirement Study (HRS) and a bounding approach that requires relatively weak assumptions. Our estimated upper bounds on the population average effects indicate potentially large causal effects of increasing schooling from primary to secondary; yet, these upper bounds are smaller than many estimates from the literature on causal schooling impacts on cognition using compulsory-schooling laws. We also cannot rule out small and null effects at this margin. We do, however, find evidence for positive causal effects on cognition of increasing schooling from secondary to tertiary. We replicate findings from the HRS using older adults from the Midlife in United States Development Study Cognitive Project. We further explore possible mechanisms through which schooling may be working—such as health, SES, occupation and spousal schooling—finding suggestive evidence of effects through such mechanisms. |
| Keywords: | Schooling, Cognition, Bounds, Aging, Partial-Identification |
| JEL: | I10 I26 J14 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:upj:weupjo:25-417 |
| By: | Vikesh Amin (Central Michigan University); Jere R. Behrman (University of Pennsylvania); Jason M. Fletcher (University of Wisconsin-Madison, IZA, and NBER); Carlos A. Flores (California Polytechnic State University); Alfonso Flores-Lagunes (W.E. Upjohn Institute for Employment Research, IZA, and GLO); Iliana Kohler (University of Pennsylvania); Hans-Peter Kohler (University of Pennsylvania); Shana D. Stites (University of Pennsylvania) |
| Abstract: | Higher schooling attainment is associated with better cognitive function at older ages, but it remains unclear whether the relationship is causal. We estimate causal effects of schooling on performances on the Consortium to Establish a Registry for Alzheimer’s Disease (CERAD) word-recall (memory) test at older ages in China, Ghana, India, Mexico, Russia, and South Africa. We used harmonized data (n=30, 896) on older adults (=50 years) from the World Health Organization Study on Global Ageing and Adult Health. We applied an established nonparametric partialidentification approach that bounds causal effects of increasing schooling attainment at different parts of the schooling distributions under relatively weak assumptions. We find that an additional year of schooling, moving from none into primary school, increased word-recall scores by between 0.01–0.13 standard deviations (SDs) in China, 0.01–0.06SDs in Ghana, 0.02–0.09SDs in India, 0.02–0.12SDs in Mexico, and 0–0.07SDs in South Africa. No results were obtained for Russia at this margin due to the low proportion of older adults with primary schooling or lower. At higher parts of the schooling distributions (e.g., high-school or university completion) the bounds cannot statistically reject null effects. Our results indicate that increasing schooling from never attended to primary had long-lasting effects on memory decades later in life for older adults in five diverse low-and-middle-income countries. |
| Keywords: | schooling, cognitive function, CERAD, LMICs, nonparametric identification |
| JEL: | C14 I15 I25 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:upj:weupjo:25-418 |
| By: | Huang, Shan |
| Abstract: | Anxiety is a mental disorder that not only impacts the physical and mental well-being of individuals but also affects cognitive functions, including decision-making processes. Does anxiety, as a trait instead of a state, disrupt the normal decision-making process? This paper explores the impact of anxiety as a trait on the normative decision-making framework, focusing specifically on economic choices that necessitate a balance between potential losses and gains. A review and discussion of how anxiety affects decision-making will be discussed in detail from cognitive psychology and neuroscience perspective. The first section examines key cognitive differences between anxious and non-anxious individuals, highlighting cognitive biases that hinder decision-making in those with anxiety. Subsequently, we analyze the neural mechanisms underlying these processes, emphasizing the roles of critical brain regions such as the amygdala and prefrontal cortex, along with relevant functional connectivity, to elucidate how cognitive biases affect individuals with anxiety during economic decision-making. Lastly, the practical implication of the paper will be discussed. |
| Keywords: | anxiety; cognitive bias; economic decision making; neuroeconomics; decision neuroscience |
| JEL: | J1 |
| Date: | 2025–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128222 |
| By: | Eric Edmonds; Priya Mukherjee; Nikhilesh Prakash; Nishith Prakash; Shwetlena Sabarwal |
| Abstract: | We evaluate the impact of a therapy intervention on Nepali adolescents at risk of dropping out of school. Our randomized controlled trial is the largest of its kind (N = 1, 707) and is novel in that participation does not require a preexisting diagnosis. Participation was high: 89 percent of adolescents offered therapy attended, with younger participants showing higher compliance. Therapy significantly reduced psychological distress, improved emotional regulation, and enhanced perspectives on life. These psychological benefits did not translate into better school attendance or cognitive outcomes. Our results indicate that mental health interventions alone may not be sufficient to improve educational performance in low-resource environments. |
| Keywords: | teen mental health, education, therapy, Nepal |
| JEL: | H25 F23 M48 H26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11888 |
| By: | Edmonds, Eric V. (Dartmouth College); Mukherjee, Priya (University of Wisconsin-Madison); Prakash, Nikhilesh (Stockholm School of Economics); Prakash, Nishith (Northeastern University); Sabarwal, Shwetlena (World Bank) |
| Abstract: | We evaluate the impact of a therapy intervention on Nepali adolescents at risk of dropping out of school. Our randomized controlled trial is the largest of its kind (N = 1, 707) and is novel in that participation does not require a preexisting diagnosis. Participation was high: 89 percent of adolescents offered therapy attended, with younger participants showing higher compliance. Therapy significantly reduced psychological distress, improved emotional regulation, and enhanced perspectives on life. These psychological benefits did not translate into better school attendance or cognitive outcomes. Our results indicate that mental health interventions alone may not be sufficient to improve educational performance in low-resource environments. |
| Keywords: | education, teen mental health, therapy, Nepal |
| JEL: | D12 I12 I15 I31 I32 O12 O18 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17884 |
| By: | Attanasio, Orazio (Yale University); Conti, Gabriella (University College London); Jervis, Pamela (Universidad de Chile); Meghir, Costas (Yale University); Okbay, Aysu (Amsterdam University of Applied Science) |
| Abstract: | We evaluate impacts heterogeneity of an Early Childhood Intervention in Colombia, with respect to the Educational Attainment Polygenic Score (EA4 PGS) constructed from DNA data based on GWAS weights from a European population. We find that the EA4 PGS is predictive of several measures of child development, mother’s IQ and, to some extent, educational attainment. We also show that the impacts of the intervention are significantly greater in children with low PGS, to the point that the intervention eliminates the initial genetic disadvantage. Lastly, we find that children with high PGS attract more parental stimulation; however, the latter increases more strongly in children with low PGS. |
| Keywords: | stimulation programs, early childhood development, GxE interactions |
| JEL: | C21 J13 I24 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17897 |
| By: | Samiha Tariq |
| Abstract: | This paper examines the impact of cognitive biases on financial decision-making through a static Bayesian game framework. While traditional economic theory assumes fully rational investors, real-world choices are often shaped by loss aversion, overconfidence, and herd behavior. Integrating psychological insights with economic game theory, the model studies strategic interactions among investors who allocate wealth between risky and risk-free assets. Solving for the Bayesian Nash Equilibrium reveals that each bias distorts optimal portfolios and alters aggregate market dynamics. The results echo Herbert Simon's notion of bounded rationality, showing how biases can generate market inefficiencies, price bubbles, and crashes. The findings highlight the importance of incorporating psychological factors into economic models to guide policies that foster market stability and more informed financial decision-making. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.18835 |