Discussion Paper No. 261
November 10, 2021
Understanding the Response to High-Stakes Incentives in Primary Education
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This paper studies responses to high-stakes incentives arising from early ability tracking. We use three complementary research designs exploiting differences in school track admission rules at the end of primary school in Germany’s early ability tracking system. Our results show that the need to perform well to qualify for a better track raises students’ math, reading, listening, and orthography skills in grade 4, the final grade before students are sorted into tracks. Evidence from self-reported behavior suggests that these effects are driven by greater study effort but not parental responses. However, we also observe that stronger incentives decrease student well-being and intrinsic motivation to study.
Keywords:
student effort; tracking; incentives;
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Discussion Paper No. 260
November 9, 2021
COVID-19 and Educational Inequality: How School Closures Affect Low- and High-Achieving Students
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In spring 2020, governments around the globe shut down schools to mitigate the spread of the novel coronavirus. We argue that low-achieving students may be particularly affected by the lack of educator support during school closures. We collect detailed time-use information on students before and during the school closures in a survey of 1,099 parents in Germany. We find that while students on average reduced their daily learning time of 7.4 hours by about half, the reduction was significantly larger for low-achievers (4.1 hours) than for high-achievers (3.7 hours). Low-achievers disproportionately replaced learning time with detrimental activities such as TV or computer games rather than with activities more conducive to child development. The learning gap was not compensated by parents or schools who provided less support for low-achieving students. The reduction in learning time was not larger for children from lower-educated parents, but it was larger for boys than for girls. For policy, our findings suggest binding distance-teaching concepts particularly targeted at low-achievers.
Keywords:
educational inequality; COVID-19; low-achieving students; home schooling; distance teaching;
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Discussion Paper No. 259
Gender Norms and Labor-Supply Expectations: Experimental Evidence from Adolescents
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Gender gaps in labor-market outcomes often emerge with the arrival of the first child. We investigate a causal link between gender norms and labor-supply expectations within a survey experiment among 2,000 German adolescents. Using a hypothetical scenario, we document that the majority of girls expects to work 20 hours or less per week when having a young child, and expects from their partner to work 30 hours or more. Randomized treatments that highlight the existing traditional norm towards mothers significantly reduce girls’ self-expected labor supply and thereby increase the expected gender difference in labor supply between their partners and themselves (the expected within-family gender gap). Treatment effects persist in a follow-up survey two weeks later, and extend to incentivized outcomes. In a second experiment, we highlight another, more gender-egalitarian, norm towards shared household responsibilities and show that this attenuates the expected within-family gender gap. Our results suggest that social norms play an important role in shaping gender gaps in labor-market outcomes around child birth.
Keywords:
gender norms; female labor supply; survey experiment;
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Discussion Paper No. 258
Firm Responses to High-Speed Internet
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Does access to the broadband internet stimulate firm growth? In this paper, I analyze within-firm growth of established firms caused by the access to faster internet using geocoded social-security data. I identify firm responses to the access to the first generation of broadband internet and later speed upgrades by exploiting technological peculiarities of the broadband internet network. I find that firms with access to the first generation of broadband internet grow more slowly in employment while keeping their output growth constant. They reduce the share of low-skilled employment in their workforce. Further, I find that firms that receive access to later speed upgrades grow more in revenues and employment than firms that got access to the first generation of broadband internet but not to the upgrades. When getting access to higher internet speed, firms over-proportionally increase medium-skilled employment.
Keywords:
ICT; internet; firm growth; skill-bias; technology;
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Discussion Paper No. 257
Do Women Expect Wage Cuts for Part-Time Work?
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Wage expectations for full- and part-time employment are key for understanding the labor supply decisions of women. However, whether women expect different wages between part-time and full-time work is not fully understood. Using German survey data, I quantify the expected full-time/part-time wage differential for a representative sample of female workers. I document that women, on average, expect only minor part-time wage penalties (1-3 percent). Comparing beliefs to selectivity-adjusted estimates of the part-time wage gap indicates that women’s mean expectations are realistic. I also show that women with children and those in managerial positions expect sizeable part-time wage cuts, with mothers overestimating the part-time wage penalty.
Keywords:
expectations; female labor supply; part-time wage gap;
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Discussion Paper No. 256
Coordination under Loss Contracts
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In this paper we study the effects that loss contracts—prepayments that can be clawbacked later—have on group coordination when there is strategic uncertainty. We compare the choices made by experimental subjects in a minimum effort game. In control sessions, incentives are formulated as a classic gain contract, while in treatment sessions, incentives are framed as an isomorphic loss contract. Our results show that loss contracts reduce the minimum efforts of groups and worsen coordination between group members, both leading to lower payoffs. However, these results depend strongly on the group’s gender composition; groups with a larger proportion of women are better at coordinating and exert more effort.
Keywords:
strategic uncertainty; loss aversion; coordination; contract design; framing; experiment;
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Discussion Paper No. 255
Common Information-processing Irrationality as Trade Creator
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We show that a common (identical across investors) irrationality in information processing can be enough to create nontrivial trade, using one of standard partial-equilibrium environments. We can attribute this trade to their common irrationality because we strip the investors and their circumstances of all heterogeneities but purely age (in a sense experience), make investment horizon age-independent, and keep all information complete. The common irrationality in our model takes the form of a somewhat non-Bayesian information processing. The resulting trade between such essentially identical individuals with the very same irrationality in their information processing can also feature different kinds of mispricing.
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Discussion Paper No. 254
Bargaining and Time Preferences: An Experimental Study
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We generalize the Rubinstein (1982) bargaining model by disentangling payoff delay from bargaining delay. We show that our extension is isomorphic to generalized discounting with dynamic consistency and characterize the unique equilibrium. Using a novel experimental design to control for various confounds, we then test comparative statics predictions with respect to time discounting. All bargaining takes place within a single experimental session, so bargaining delay is negligible and dynamic consistency holds by design, while payoff delay per disagreement round is significant and randomized transparently at the individual level (week/month, with/without front-end delay). In contrast to prior experiments, we obtain strong behavioral support for the basic predictions that hold regardless of the details of discounting. Testing differential predictions of different forms of discounting, we strongly reject exponential discounting in favor of present-biased discounting.
Keywords:
alternating-offers bargaining; time preferences; present bias; laboratory experiments;
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Discussion Paper No. 253
Face Masks Increase Compliance with Physical Distancing Recommendations during the COVID-19 Pandemic
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Governments across the world have implemented restrictive policies to slow the spread of COVID-19. Recommended face mask use has been a controversially discussed policy, among others, due to potential adverse effects on physical distancing. Using a randomized field experiment (N=300), we show that individuals keep a significantly larger distance from someone wearing a face mask than from an unmasked person. According to an additional survey experiment (N=456), masked individuals are not perceived as being more infectious than unmasked ones, but they are believed to prefer more distancing. This result suggests that, in times where mask use is voluntary, wearing a mask serves as a social signal for a preferred greater distance that is respected by others. Our findings provide strong evidence against the claim that mask use creates a false sense of security that would negatively affect physical distancing.
Keywords:
COVID-19; health policy; compliance; face masks; risk compensation; field experiment;
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Discussion Paper No. 252
Objective Rationality Foundations for (Dynamic) α-MEU
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We show how incorporating Gilboa, Maccheroni, Marinacci, and Schmeidler’s (2010) notion of objective rationality into the α-MEU model of choice under ambiguity (Hurwicz, 1951) can overcome several challenges faced by the baseline model without objective rationality. The decision-maker (DM) has a subjectively rational preference ≥^, which captures the complete ranking over acts the DM expresses when forced to make a choice; in addition, we endow the DM with a (possibly incomplete) objectively rational preference ≥*, which captures the rankings the DM deems uncontroversial. Under the objectively founded α-MEU model, ≥^ has an α-MEU representation and ≥* has a unanimity representation à la Bewley (2002), where both representations feature the same utility index and set of beliefs. While the axiomatic foundations of the baseline α-MEU model are still not fully understood, we provide a simple characterization of its objectively founded counterpart. Moreover, in contrast with the baseline model, the model parameters are uniquely identified. Finally, we provide axiomatic foundations for prior-by-prior Bayesian updating of the objectively founded α-MEU model, while we show that, for the baseline model, standard updating rules can be ill-defined.
Keywords:
ambiguity; α-MEU; objective rationality; updating;
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