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on Neuroeconomics |
| By: | Jonathan Benchimol (BoI - Bank of Israel); Lahcen Bounader (WBG = GBM - World Bank Group = Groupe Banque Mondiale); Mario Dotta (FGV - Fundacao Getulio Vargas [Rio de Janeiro]) |
| Abstract: | Bounded rationality and limited attention significantly influence expectation formation and macroeconomic dynamics, yet empirical quantification of these behavioral phenomena remains challenging. This paper provides the first cross-country estimation of both micro- and macro-level attention parameters using a structurally identified behavioral New Keynesian model. Employing Bayesian techniques on harmonized data from 22 OECD countries (1996--2019) and ensuring robust parameter identification, we document substantial heterogeneity in behavioral inattention across countries. Our cognitive discounting estimates range from 0.76 to 0.98, with higher values indicating greater attention. We establish three key empirical regularities: (1) attention parameters are positively associated with macroeconomic volatility, supporting rational inattention theory; (2) surprise movements in key macroeconomic variables and online information-seeking behavior significantly influence attention allocation; and (3) institutional quality, particularly government effectiveness, is correlated with attention levels. These findings reveal that attention is both a behavioral and a structural phenomenon, responding to institutional factors and economic conditions. Our results provide an empirical foundation for calibrating country-specific models and yield important implications for the design and transmission of monetary policy under bounded rationality, showing that policy effectiveness may systematically vary with the macroeconomic environment. |
| Keywords: | Cognitive discounting, Myopia, Attention, Bayesian estimation, Behavioral macroeconomics |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05170065 |
| By: | Chiswick, Barry R. (George Washington University); Corman, Hope (Rider University); Dave, Dhaval M. (Bentley University); Reichman, Nancy E. (Rutgers University) |
| Abstract: | This study analyzes, for the first time, the effect of increases in the minimum wage on the labor market outcomes of working age adults with cognitive disabilities, a vulnerable and low-skilled sector of the actual and potential labor pool. Using data from the American Community Survey (2008-2023), we estimated effects of the minimum wage on employment, labor force participation, weeks worked, and hours worked among working age individuals with cognitive disabilities using a generalized difference-in-differences research design. We found that a higher effective minimum wage leads to reduced employment and labor force participation among individuals with cognitive disabilities but has no significant effect on labor supply at the intensive margin for this group. Adverse impacts were particularly pronounced for those with lower educational attainment. In contrast, we found no significant labor market effects of an increase in the minimum wage for individuals with physical disabilities or in the non-disabled population. |
| Keywords: | american community survey, labor market outcomes, employment, cognitive disability, minimum wage |
| JEL: | J14 J2 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18021 |
| By: | Mani, Sneha; Gupta, Aashish; Elo, Irma |
| Abstract: | Scientific understanding of the relationship between environmental hazards and cognitive health at older ages in low- and middle-income countries (LMICs) is poor. Using data from the Longitudinal Aging Study of India and the World Health Organization's Survey on Global AGEing and adult health for four LMICs, we examine the association of direct and local exposure to polluting cooking fuels with cognitive health at older ages. We document the negative influence of both: cognitive health is poorer among members of households that use polluting fuels and among residents of neighborhoods where the use of polluting fuels is more common. These associations cannot be explained by accounting for individual or local differences in socioeconomic status. Consistent with direct impacts of polluting fuels, we find that women in households where the use of polluting fuels is common have the lowest predicted cognitive scores. Our findings reveal the substantial direct influence and negative externalities of polluting fuel use in LMICs and help understand why overall cognitive health may be poor in these settings. Moving away from polluting fuels toward clean fuels may not only reduce individual risk but also community-level exposure to air pollution, contributing to better cognitive health in older ages. |
| Date: | 2025–06–22 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:73nyb_v1 |
| By: | Atsushi INOUE; Ryuichi TANAKA |
| Abstract: | This study investigated the effects of bullying victimization on cognitive, noncognitive, and friendship outcomes using panel data collected from elementary school students in a Japanese city. Employing a value-added model that controls for prior outcomes, our findings revealed that bullying victimization significantly impairs both cognitive and noncognitive development and weakens friendship formation. Furthermore, a high prevalence of bullying victimization within the classroom was found to negatively impact cognitive outcomes in subsequent years. These findings underscore the importance of effective school bullying prevention in fostering human and social capital among school-aged children. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25077 |
| By: | Axel Eizmendi Larrinaga; Germ\'an Reyes |
| Abstract: | This paper shows that the timing of monetary transfers to low-income families affects students' cognitive performance on high-stakes standardized tests. We combine administrative records from the world's largest conditional cash transfer program with college admission exam results of 185, 000 high school students from beneficiary families. Exploiting random variation in payment dates, we find that receiving the transfer in the days preceding the exam increases test scores by 0.01 standard deviations relative to receiving it the subsequent week. Question-level analysis reveals that effects are concentrated in final questions and easier questions, suggesting improved cognitive endurance and effort allocation. The impacts are largest for recipients of larger transfers, who experience persistent gains in human capital accumulation: their college enrollment increases by 0.6 percentage points, with higher graduation and formal employment rates seven years later. Our findings show that short-term liquidity constraints during high-stakes events can have long-lasting implications, and suggest opportunities to improve social programs through improved payment scheduling. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.21393 |
| By: | Egil Diau |
| Abstract: | The origins of economic behavior remain unresolved-not only in the social sciences but also in AI, where dominant theories often rely on predefined incentives or institutional assumptions. Contrary to the longstanding myth of barter as the foundation of exchange, converging evidence from early human societies suggests that reciprocity-not barter-was the foundational economic logic, enabling communities to sustain exchange and social cohesion long before formal markets emerged. Yet despite its centrality, reciprocity lacks a simulateable and cognitively grounded account. Here, we introduce a minimal behavioral framework based on three empirically supported cognitive primitives-individual recognition, reciprocal credence, and cost--return sensitivity-that enable agents to participate in and sustain reciprocal exchange, laying the foundation for scalable economic behavior. These mechanisms scaffold the emergence of cooperation, proto-economic exchange, and institutional structure from the bottom up. By bridging insights from primatology, developmental psychology, and economic anthropology, this framework offers a unified substrate for modeling trust, coordination, and economic behavior in both human and artificial systems. For an interactive visualization of the framework, see: https://egil158.github.io/cogfoundations -econ/ |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.02945 |
| By: | Bhalotra, Sonia (Department of Economics, University of Warwick, CAGE, IFS, CEPR, IEA, IZA); Daysal, N. Meltem (Department of Economics, University of Copenhagen, CEBI, CESifo, IZA); Trandafir, Mircea (Rockwool Foundation Research Unit and IZA) |
| Abstract: | Mental health disorders tend to emerge in childhood, with half starting by age 14. This makes early intervention important, but treatment rates are low, and antidepressant treatment for children remains controversial since an FDA warning in 2004 that highlighted adverse effects. Linking individuals across Danish administrative registers, we provide some of the first evidence of impacts of antidepressant treatment in childhood on objectively measured mental health indicators and economic outcomes over time, and the first attempt to investigate under- vs overtreatment. Leveraging conditional random assignment of patients to psychiatrists with different prescribing tendencies, we find that treatment during ages 8-15 improves test scores at age 16, particularly in Math, increases enrollment in post-compulsory education at age 18, and that it leads to higher employment and earnings and lower welfare dependence at ages 25–30. We demonstrate, on average, a reduction in suicide attempts, self-harm, and hospital visits following AD initiation. The gains to treatment are, in general, larger for low SES children, but they are less likely to be treated. Using a marginal treatment effects framework and Math scores as the focal outcome, we show positive returns to treatment among the untreated. Policy simulations confirm that expanding treatment among low SES children (and boys) generates substantial net benefits, consistent with under-treatment in these groups. Our findings underscore the potential of early mental health treatment to improve longer term economic outcomes and reducing inequality. |
| Keywords: | Antidepressants, mental health, education, test scores, human capital, Denmark, physician leniency, marginal treatment effects JEL Classification: I11, I12, I18, J13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:766 |
| By: | Yu BAI; Yanjun LI; Xinyan LIU; Ryuichi TANAKA |
| Abstract: | This paper examines the impact of a relaxation-oriented educational policy on the mental health outcomes of affected children. Leveraging a difference-in-differences estimation strategy, we utilize the exogenous shock introduced by Japan’s 2002 relaxation-oriented curriculum reform to assess the effect of decreased instruction time on student mental health. Our results indicate that individuals exposed to more years of relaxed education tended to experience improved mental health outcomes. We also explore potential mechanisms behind these improvements, noting that reduced hours of study and increased time for leisure activities contribute to better mental health. However, the effect appears to be temporary, suggesting that while relaxed education policies can enhance students’ mental health, these benefits may not endure long-term. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25076 |