Discussion Paper No. 196
November 9, 2021
Do Performance Ranks Increase Productivity? Evidence from a Field Experiment
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Can a firm increase its workers' eff ort by introducing competition through performance-based ranking? On one hand such ranking can increase eff ort because of individuals' desire for status from high ranks, but on the other, it can demotivate them or make them wary of outperforming peers. This paper disentangles the e ffects of demotivation, social conformity, and status associated with ranking through a randomized experiment at a Bangladeshi sweater factory. Treated workers receive monthly information on their relative performance either in private or in public. Both a simple theoretical framework and empirical evidence from the field show that workers' intrinsic desire to be good at work induces privately ranked workers to increase eff ort upon receiving positive feedback, but they get demotivated and decrease e ffort upon receiving negative feedback. Public ranking lead to lower net eff ort relative to private ranking because of a strong preference not to outperform friends. The negative e ffects from demotivation and social conformity may explain why the existing literature finds mixed evidence of impact of ranking workers.
Keywords:
peer effects; productivity; rank incentives;
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Discussion Paper No. 195
Decision-Making Traits and States as Determinants of Risky Choices
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We test the effects of dual processing differences in both individual traits and decision states on risk taking. In an experiment with a large representative sample (N = 1,832), we vary whether risky choices are induced to be based on either emotion or reason, while simultaneously measuring individual decision-making traits. Our results show that decision-making traits are strong and robust determinants of risk taking: a more intuitive trait is associated with more risk taking, while a more deliberative trait is associated with less risk taking. Experimentally induced states, on the other hand, have no effect on risk taking. A test of state-trait interactions shows that the association between an intuitive trait and risk taking becomes weaker in the emotion-inducing state and in the loss domain. In contrast, the association between a deliberative trait and risk taking is stable across states. These findings highlight the importance of considering state-trait interactions when using dual processing theories to predict individual differences in risk taking.
Keywords:
risk preferences; intuition; emotion; reason; experiment;
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Discussion Paper No. 194
Top of the Class: The Importance of Ordinal Rank
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This paper establishes a new fact about educational production: ordinal academic rank during primary school has lasting impacts on secondary school achievement that are independent of underlying ability. Using data on the universe of English school students, we exploit naturally occurring differences in achievement distributions across primary school classes to estimate the impact of class rank. We find large effects on test scores, confidence, and subject choice during secondary school, even though these students have a new set of peers and teachers who are unaware of the students’ prior ranking in primary school. The effects are especially pronounced for boys, contributing to an observed gender gap in the number of STEM courses chosen at the end of secondary school. Using a basic model of student effort allocation across subjects, we distinguish between learning and non-cognitive skills mechanisms, finding support for the latter.
Keywords:
rank; non-cognitive skills; peer effects; productivity;
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Discussion Paper No. 193
The Existence and Persistence of the Pay-Per-Use Bias in Car Sharing Services
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A key benefit of using car sharing services (relative to car ownership) is that they are more cost effective. Car sharing firms offer a menu of pricing plans to make this happen. The two most common plans are flat-rate and pay-per-use pricing. However, little is known about how consumers choose among these pricing plans. In this study, we analyze consumers’ choices between pay-per-use and flat-rate pricing using data from a car sharing provider in a large European city. We show that over 40% of customers make nonoptimal pricing plan choices (i.e., they do not choose the cost minimizing plan). In contrast to previous research, we find a prevalent and time-persistent pay-per-use bias; i.e., we find little evidence that consumers “learn”. We propose three potential explanations for the existence and persistence of this bias. First, we suggest that customers underestimate their usage. Second, we propose that customers have a preference for flexibility, leading them to pay more. Finally, we show that the physical context, such as weather, increases the likelihood of a pay-per-use bias. We suggest that the pay-per-use bias may be the prevalent tariff choice bias in the Sharing Economy.
Keywords:
sharing economy; car sharing; pricing; pay-per-use bias; flat-rate bias;
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Discussion Paper No. 192
Procrastination and Learning about Self-Control
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We study a model of task completion with the opportunity to learn about own self-control problems over time. While the agent is initially uncertain about her future self-control, in each period she can choose to learn about it by paying a non-negative learning cost and spending one period. If the agent has time-consistent preferences, she always chooses to learn whenever the learning is beneficial. If the agent has time-inconsistent preferences, however, she may procrastinate such a learning opportunity. Further, if her time preferences exhibit inter-temporal conflicts between future selves (e.g., hyperbolic discounting), the procrastination of learning can occur even when the learning cost is zero. The procrastination also leads to a non-completion of the task. When the agent has multiple initially-uncertain attributes (e.g., own future self-control and own ability for the task), the agent’s endogenous learning decisions may be misdirected — she chooses to learn what she should not learn from her initial perspective, and she chooses not to learn what she should.
Keywords:
procrastination; self-control; naivete; hyperbolic discounting; misdirected learning;
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Discussion Paper No. 191
Deutschland: ein Land der Mieter? Die Rolle von Erwartungen über zukünftige Immobilienpreisentwicklungen
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Mehr als die Hälfte aller Haushalte in Deutschland wohnen zur Miete – ein im internationalen Vergleich sehr hoher Wert. Bisherige Studien haben vor allen Dingen den regulatorischen Rahmen des Immobilienmarkts hervorgehoben, der Mietwohnungen in Deutschland systematisch begünstigt. Allerdings gibt es keine Studien, die diese Erklärungen empirisch eindeutig untermauern können: einige Arbeiten betonen die Bedeutung von fundamentalen Marktdaten wie die Einkommensentwicklung, demographische Faktoren oder den Zuzug in eine Region. Diese Studie greift einen Aspekt auf, der bislang nicht in der Literatur diskutiert wurde. Untersucht wird, ob und zu welchem Anteil die geringe Eigentümerquote in Deutschland durch pessimistische Erwartungen bezüglich zukünftiger Immobilienpreisentwicklungen erklärt werden kann – erwarten Mieter keine oder nur geringe Preissteigerungen, so sinkt die Attraktivität einer Investition in die eigenen vier Wände. Für die empirische Analyse werden Daten aus einer neuen, repräsentativen Befragung, erhoben im Rahmen des SOEP-IS, ausgewertet. Befragte ausländischer Herkunft sind optimistischer hinsichtlich der Immobilienpreisentwicklung. Sie erwarten langfristig einen signifikant höheren Preisanstieg. Dies legt nahe, dass die erheblich pessimistischeren Preiserwartungen der einheimischen Bevölkerung auch dazu führen, dass sie sich seltener als die Bevölkerung in anderen Ländern für selbstgenutztes Wohneigentum entscheiden.
Keywords:
Wohneigentumsquote; Preiserwartungen; Immobilieninvestition;
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Discussion Paper No. 190
Complexity and Distributive Fairness Interact in Affecting Compliance Behavior
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Filing income tax returns or insurance claims often requires that individuals comply with complex rules to meet their obligations. We present evidence from a laboratory tax experiment suggesting that the effects of complexity on compliance are intrinsically linked to distributive fairness. We find that compliance remains largely una ffected by complexity when income taxes are distributed to a morally justi fied charity. Conversely, complexity signi ficantly amplifi es non-compliance when income taxes appear wasted as they are distributed to a morally dubious charity. Our data further suggest that this non-compliance pattern is facilitated through the ambiguity that evolves from mostly unstrategic fi ling mistakes.
Keywords:
complexity; compliance; distributive fairness; experiment;
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Discussion Paper No. 189
Optimal Social Assistance and Unemployment Insurance in a Life-Cycle Model of Family Labor Supply and Savings
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We empirically analyze the optimal mix and optimal generosity of unemployment insurance and social assistance programs. To do so, we specify a structural life-cycle model of the labor supply, savings, and social assistance claiming decisions of singles and married couples. Partial insurance against wage and employment shocks is provided by social programs, savings, and the labor supplies of all adult household members. We show that the optimal policy mix is dominated by moderately generous social assistance, which guarantees a permanent universal minimum household income, with only a minor role for temporary earnings-related unemployment insurance. The optimal amount of social assistance is heavily influenced by income pooling in married households. This pooling provides partial insurance against negative economic shocks, reducing the optimal generosity of social assistance.
Keywords:
unemployment insurance; social assistance; design of benefit programs; life-cycle labor supply; intra-household insurance; household savings; employment risk; added worker effect;
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Discussion Paper No. 188
Insurance, Redistribution, and the Inequality of Lifetime Income
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Individuals vary considerably in how much they earn during their lifetimes. We study how the tax-and-transfer system o sets inequalities in lifetime earnings, which would otherwise translate into di erences in living standards. Based on a life-cycle model, we fi nd that redistribution by taxes and transfers off sets 54% of the inequality in lifetime earnings that is due to heterogeneous skill endowments. Meanwhile, taxes and transfers insure 45% of lifetime earnings risk. Taxes would provide more insurance if based on lifetime instead of annual earnings. Requiring wealthy individuals to repay social assistance received when younger would strengthen the insurance and redistributive functions of social assistance.
Keywords:
lifetime earnings; lifetime income; tax-and-transfer system; taxation; unemeployment insurance; disability benefits; redistribution; insurance; endowment; risk; dynamic life-cycle models;
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Discussion Paper No. 187
Financial Education in Schools: A Meta-Analysis of Experimental Studies
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We study the literature on school financial education programs for children and youth via a quantitative meta-analysis of 37 (quasi-) experiments. We find that financial education treatments have, on average, sizeable impacts on financial knowledge (+0.33 SD), similar to educational interventions in other domains. Additionally, we document smaller effects on financial behaviors among students (+0.07 SD). When restricting the sample to 18 randomized experiments average effect sizes are estimated to be about 0.15 SD units on financial knowledge and 0.07 SD units on financial behaviors. These results are robust irrespective of the meta-analytic method used and when accounting for publication bias. Subgroup analyses show the beneficial effect of more intensive treatments, albeit with decreasing marginal returns.
Keywords:
financial education; financial literacy; financial behavior; meta-analysis;
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