Discussion Papers

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Discussion Paper No. 320
February 24, 2022

Social Media and Mental Health

Authors:
Braghieri, Luca (LMU Munich)
Levy, Ro'ee (MIT)
Makanin, Alexey (EIEF and CEPR)
Abstract:
The diffusion of social media coincided with a worsening of mental health conditions among adolescents and young adults in the United States, giving rise to speculation that social media might be detrimental to mental health. In this paper, we provide the first quasi-experimental estimates of the impact of social media on mental health by leveraging a unique natural experiment: the staggered introduction of Facebook across U.S. colleges. Our analysis couples data on student mental health around the years of Facebook’s expansion with a generalized difference-in-differences empirical strategy. We find that the roll-out of Facebook at a college increased symptoms of poor mental health, especially depression, and led to increased utilization of mental healthcare services. We also find that, according to the students’ reports, the decline in mental health translated into worse academic performance. Additional evidence on mechanisms suggests the results are due to Facebook fostering unfavorable social comparisons.
JEL-Classification:
D12; D72; D90; I10; L82; L86
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Discussion Paper No. 319
February 18, 2022

COVID-19 and Pro-Sociality: How Do Donors Respond to Local Pandemic Severity, Increased Salience, and Media Coverage?

Authors:
Adena, Maja (WZB Berlin)
Harke, Julian (WZB Berlin)
Abstract:
Has the COVID-19 pandemic affected pro-sociality among individuals? After the onset of the pandemic, many charitable appeals were updated to include a reference to COVID-19. Did donors increase their giving in response to such changes? In order to answer these questions, we conducted a real-donation online experiment with more than 4,200 participants from 149 local areas in England and over 21 weeks. First, we varied the fundraising appeal to either include or exclude a reference to COVID-19. We found that including the reference to COVID-19 in the appeal increased donations. Second, in a natural experiment-like approach, we studied how the relative local severity of the pandemic and media coverage about local COVID-19 severity affected giving in our experiment. We found that both higher local severity and more related articles increased giving of participants in the respective areas. This holds for different specifications, including specifications with location fixed effects, time fixed effects, a broad set of individual characteristics to account for a potentially changing composition of the sample over time and to account for health- and work-related experiences with and expectations regarding the pandemic. While negative experiences with COVID-19 correlate negatively with giving, both approaches led us to conclude that the pure effect of increased salience of the pandemic on pro-sociality is positive. Despite the shift in public attention toward the domestic fight against the pandemic and away from developing countries’ challenges, we found that preferences did not shift toward giving more to a national project and less to developing countries.
Keywords:
COVID-19; charitable giving; online experiments; natural experiments
JEL-Classification:
C93; D64; D12
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Discussion Paper No. 318
February 14, 2022

Taxing Mobile and Overconfident Top Earners

Authors:
Haufler, Andreas (LMU Munich and CESifo)
Nishimura, Yukihiro (Osaka University and CESifo)
Abstract:
We set up a simple model of tax competition for mobile, highly-skilled and overconfident managers. Firms endogenously choose the compensation scheme for managers, which consists of a fixed wage and a bonus payment in the high state. Managers are overconfident about the probability of the high state and hence of receiving the bonus, whereas firms and governments are not. When governments maximize tax revenues, we show that overconfidence unambiguously reduces the bonus tax rate that governments set in the non-cooperative tax equilibrium, while increasing tax revenues. When the government objective incorporates the welfare of resident managers, however, bonus taxes also serve a corrective role and may rise in equilibrium when overconfidence is increased.
Keywords:
overconfidence; bonus taxes; tax competition; migration
JEL-Classification:
H20; H87; G28
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Discussion Paper No. 317
February 4, 2022

Speed, Quality, and the Optimal Timing of Complex Decisions: Field Evidence

Authors:
Strittmatter, Anthony (CREST-ENSAE)
Sunde, Uwe (LMU Munich)
Zegners, Dainis (Rotterdam School of Management)
Abstract:

This paper presents an empirical investigation of the relation between decision speed and decision quality for a real-world setting of cognitively-demanding decisions in which the timing of decisions is endogenous: professional chess. Move-by-move data provide exceptionally detailed and precise information about decision times and decision quality, based on a comparison of actual decisions to a computational benchmark of best moves constructed using the artificial intelligence of a chess engine. The results reveal that faster decisions are associated with better performance. The findings are consistent with the predictions of procedural decision models like drift-diffusion-models in which decision makers sequentially acquire information about decision alternatives with uncertain valuations.

Keywords:
response times; speed-performance profile; drift-diffusion model; uncertain evaluations
JEL-Classification:
D01; D09; C07; C08
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Discussion Paper No. 316
January 29, 2022

The Fiscal State in Africa: Evidence from a Century of Growth

Authors:
Albers, Thilo N. H. (HU Berlin and Lund University)
Jerven, Morten (Norwegian University of Life Sciences)
Suesse, Marvin (Trinity College Dublin)
Abstract:
What is the level of state capacity in developing countries today, and what have been its drivers over the past century? We construct a comprehensive new dataset of tax and revenue collection for 46 African polities from 1900 to 2015. Descriptive analysis shows that many polities in Africa have been characterized by strong growth in fiscal capacity. As a next step, we explain this growth using a fixed-effects long-run panel setting. The results show that canonical state-building factors such as democratic institutions and interstate warfare can increase revenue collection, while government turnover reduces it. Access to external credit and foreign aid are even more important, and both negatively affect fiscal capacity. In addition, access to external revenues, especially from commodity exports and debt, moderates the operation of canonical state-building factors such as democracy and conflict. These insights add important nuances to established theories of state building. Not only are states in Africa more capable than hitherto thought, but the international environment shapes their capacity, both directly and indirectly.
Keywords:
fiscal capacity; taxes; Africa; statehood; resources; external finance
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Discussion Paper No. 315
January 29, 2022

Perks and Pitfalls of City Directories as a Micro-Geographic Data Source

Authors:
Albers, Thilo N. H. (HU Berlin)
Kappner, Kalle (HU Berlin)
Abstract:
Historical city directories are rich sources of micro-geographic data. They provide information on the location of households and firms and their occupations and industries, respectively. We develop a generic algorithmic work flow that converts scans of them into geo- and status-referenced household-level data sets. Applying the work flow to our case study, the Berlin 1880 directory, adds idiosyncratic challenges that should make automation less attractive. Yet, employing an administrative benchmark data set on household counts, incomes, and income distributions across more than 200 census tracts, we show that semi-automatic referencing yields results very similar to those from labour-intensive manual referencing. Finally, we discuss potential applications in economic history and beyond.
Keywords:
city directories; data extraction; granular spatial data
JEL-Classification:
C8; R1; N9
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Discussion Paper No. 314
January 25, 2022

Anchored Strategic Reasoning

Authors:
Ivanova-Stenzel, Radosveta (TU Berlin)
Seres, Gyula (HU Berlin)
Abstract:
Anchoring is a robust behavioral phenomenon modeled predominantly as a bias in individual judgment. We propose a game-theoretic model that considers players’ beliefs about others’ behavior as a mediator for the effect of the anchor on a player’s choice. The results establish that anchoring in strategic interactions reported in the literature can be rationalized by anchored beliefs about the opponents’ intentions. Notwithstanding, we also demonstrate that a player might adjust away from rather than toward the anchor in games where choices are strategic substitutes.
Keywords:
anchoring bias; auctions; games; incomplete information; strategy
JEL-Classification:
D01; D91; C72
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Discussion Paper No. 313
January 21, 2022

House Price Expectations

Authors:
Gohl, Niklas (DIW Berlin and University of Potsdam)
Haan, Peter (DIW Berlin, FU Berlin and Netspar)
Michelsen, Claus (DIW Berlin and Leuphana University Lueneburg)
Weinhardt, Felix (European University Viadrina and DIW Berlin)
Abstract:
This study examines short-, medium-, and long-run price expectations in housing markets. We derive and test six hypothesis about the incidence, formation, and relevance of price expectations. To do so, we use data from a tailored household survey, past sale and rental offerings, satellites, and from an information RCT. As novel findings, we show that price expectations exhibit mean reversion in the long-run. Moreover, we do not find evidence for biases related to individual housing tenure decisions or regret aversion. Confirming existing findings, we show that local market characteristics matter for expectations throughout, as well as aggregate price information. Lastly, we corroborate existing evidence that expectations are relevant for portfolio choice.
Keywords:
housing markets; price expectations
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Discussion Paper No. 312
January 20, 2022

Intertemporal Consumption and Debt Aversion: A Replication and Extension

Authors:
Ahrens, Steffen (FU Berlin)
Bosch-Rosa, Ciril (TU Berlin)
Meissner, Thomas (Maastricht University)
Abstract:
We replicate Meissner (2016) where debt aversion was reported for the first time in an intertemporal consumption and saving problem. While Meissner (2016) uses a German sample, our subjects are US undergraduate students. All of the main findings from the original study replicate with similar effect sizes. Additionally, we extend the original analysis by correlating a new individual index of debt aversion on individual characteristics such as gender, cognitive ability, and risk aversion. The findings suggest that gender and risk aversion are not correlated with debt aversion. However, cognitive ability is positively correlated with debt aversion. Overall, this paper confirms the importance of debt aversion in intertemporal consumption problems and validates the approach of Meissner (2016).
Keywords:
debt aversion; replication; experiment
JEL-Classification:
C91; D84; G11; G41
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Discussion Paper No. 311
January 18, 2022

Income Contingency and the Electorate’s Support for Tuition

Authors:
Lergetporer, Philipp (TU Munich and ifo Institute)
Woessmann, Ludger (ifo Institute and LMU Munich)
Abstract:
We show that the electorate’s preferences for using tuition to finance higher education strongly depend on the design of the payment scheme. In representative surveys of the German electorate (N>18,000), experimentally replacing regular upfront by deferred income-contingent payments increases public support for tuition by 18 percentage points. The treatment turns a plurality opposed to tuition into a strong majority of 62 percent in favor. Additional experiments reveal that the treatment effect similarly shows when framed as loan repayments, when answers carry political consequences, and in a survey of adolescents. Reduced fairness concerns and improved student situations act as strong mediators.
Keywords:
tuition; higher education finance; income-contingent loans; voting
JEL-Classification:
H52; I22; D72
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