Discussion Paper No. 83
November 4, 2021
Blaming the Refugees? Experimental Evidence on Responsibility Attribution
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Do people blame refugees for negative events? We propose a novel experimental paradigm to measure discrimination in responsibility attribution towards Arabic refugees. Participants in the laboratory experience a positive or negative income shock, which is with equal probability caused by a random draw or another participant's performance in a real effort task. Responsibility attribution is measured by beliefs about whether the shock is due to the other participant's performance or the random draw. We find evidence for reverse discrimination: Natives attribute responsibility more favorably to refugees than to other natives. In particular, refugees are less often held responsible for negative income shocks. Moreover, natives with negative implicit associations towards Arabic names attribute responsibility less favorably to refugees than natives with positive associations. Since neither actual performance differences nor beliefs about natives' and refugees' performance can explain our finding of reverse discrimination, we rule out statistical discrimination as the driving force. We discuss explanations based on theories of self-image and identity concerns.
Keywords:
refugees; discrimination; responsibility attribution;
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Discussion Paper No. 82
Suspicious Success - Cheating, Inequality, Acceptance, and Political Preferences
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Supporters of left-wing parties typically place more emphasis on redistributive policies than right-wing voters. I investigate whether this difference in tolerating inequality is amplified by suspicious success - achievements that may arise from cheating. Using a laboratory experiment, I exogenously vary cheating opportunities for stakeholders who work on a real effort task and earn money according to their self-reported performances. An impartial spectator is able to redistribute the earnings between the stakeholders, although it is not possible to detect cheating. I find that the opportunity to cheat leads to different views on whether to accept inequality. Left-wing spectators substantially reduce inequality when cheating is possible, while the treatment has no significant effect on choices of right-wing spectators. Since neither differences in beliefs nor differences in norms about cheating can explain this finding, it seems to be driven by a difference in preferences. These results suggest that redistributive preferences will diverge even more once public awareness increases that inequality may be to a certain extent created by cheating.
Keywords:
cheating; inequality; fairness; political preferences; redistribution;
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Discussion Paper No. 81
Unleashing Animal Spirits - Self-Control and Overpricing in Experimental Asset Markets
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One explanation for overpricing on asset markets is a lack of traders' self-control. Self-control is the individual capacity to override or inhibit undesired impulses that may drive prices. We implement the first experiment to address the causal relationship between self-control abilities and systematic overpricing on financial markets. Our setup can detect some of the channels through which individual self-control restrictions could transmit into irrational exuberance in markets. Our data indicate a large direct effect of restricted self-control abilities on market overpricing. Low self-control traders report stronger emotions after the market.
Keywords:
G02; G11; G12; D53; D84;
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Discussion Paper No. 80
Does Having Insurance Change Individuals Self-Confidence
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Recent research in contract theory on the effects of behavioral biases implicitly assumes that they are stable, in the sense of not being affected by the contracts themselves. In this paper, we provide evidence that this is not necessarily the case. We show that in an insurance context, being insured against losses that may be incurred in a real-effort task changes subjects' self-confidence. Our novel experimental design allows us to disentangle selection into insurance from the effects of being insured by randomly assigning coverage after subjects revealed whether they want to be insured or not. We find that uninsured subjects are underconfident while those that obtain insurance have well-calibrated beliefs. Our results suggest that there might be another mechanism through which insurance affects behavior than just moral hazard.
Keywords:
D84; D82; C91;
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Discussion Paper No. 79
Global Evidence on Economic Preferences
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This paper studies the global variation in economic preferences. For this purpose, we present the Global Preference Survey (GPS), an experimentally validated survey dataset of time preference, risk preference, positive and negative reciprocity, altruism, and trust from 80,000 individuals in 76 countries. The data reveal substantial heterogeneity in preferences across countries, but even larger within-country heterogeneity. Across individuals, preferences vary with age, gender, and cognitive ability, yet these relationships appear partly country specific. At the country level, the data reveal correlations between preferences and bio-geographic and cultural variables such as agricultural suitability, language structure, and religion. Variation in preferences is also correlated with economic outcomes and behaviors. Within countries and subnational regions, preferences are linked to individual savings decisions, labor market choices, and prosocial behaviors. Across countries, preferences vary with aggregate outcomes ranging from per capita income, to entrepreneurial activities, to the frequency of armed conflicts.
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Discussion Paper No. 78
The Axiomatic Foundation of Logit
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Multinomial logit is the canonical model of discrete choice but widely criticized for requiring functional form assumptions as foundation. The present paper shows that logit is behaviorally founded without such assumptions. Logit's functional form obtains if relative choice probabilities are independent of irrelevant alternatives and invariant to utility translation, to relabeling options (presentation independence), and to changing utilities of third options (context independence). Reviewing behavioral evidence, presentation and context independence seem to be violated in typical experiments, though not IIA and translation invariance. Relaxing context independence yields contextual logit (Wilcox, 2011), relaxing presentation independence allows to capture "focality" of options.
Keywords:
stochastic choice; logit; axiomatic foundation; behavioral evidence; utility estimation;
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Discussion Paper No. 77
Specification Testing in Random Coefficient Models
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In this paper, we suggest and analyze a new class of specification tests for random coefficient models. These tests allow to assess the validity of central structural features of the model, in particular linearity in coefficients, generalizations of this notion like a known nonlinear functional relationship, or degeneracy of the distribution of a random coefficient, i.e., whether a coefficient is fixed or random, including whether an associated variable can be omitted altogether. Our tests are nonparametric in nature, and use sieve estimators of the characteristic function. We provide formal power analysis against global as well as against local alternatives. Moreover, we perform a Monte Carlo simulation study, and apply the tests to analyze the degree of nonlinearity in a heterogeneous random coefficients demand model. While we find some evidence against the popular QUAIDS specification with random coefficients, it is not strong enough to reject the specification at the conventional significance level.
Keywords:
nonparametric; specification; testing; random coefficients; unobserved heterogeneity; sieve estimation; characteristic function; consumer demand;
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Discussion Paper No. 76
On the Relationship Between Cognitive Ability and Risk Preference
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This paper focuses on the relationship between cognitive ability and decision making under risk and uncertainty. We begin by clarifying some important distinctions between concepts and measurement of risk preference and cognitive ability and then take stock of what is known empirically on the connections between cognitive ability and measured risk preferences.
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Discussion Paper No. 75
Job Search with Subjective Wage Expectations
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This paper analyzes how subjective expectations about wage opportunities influence the job search decision. We match data on subjective wage expectations with administrative employment records. The data reveal that unemployed individuals over-estimate their future net re-employment wage by 10% on average. In particular, the average individual does not anticipate that wage offers decline in value with their elapsed time out of em- ployment. How does this optimism affect job finding? We analyze this question using a structural job search framework in which subjective expectations about future wage offers are not constrained to be consistent with reality. Results show that wage optimism has highly dynamic effects: upon unemployment entry, optimism decreases job finding by about 8%. This effect weakens over the unemployment spell and eventually switches sign after about 8 months of unemployment. From then onward, optimism prevents un- employed individuals from becoming discouraged and thus increases search. On average, optimism increases the duration of unemployment by about 6.5%.
Keywords:
job search; subjective expectations; structural estimation;
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Discussion Paper No. 74
A Compact Topology for Sigma-Algebra Convergence
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We propose a sequential topology on the collection of sub-sigma-algebras included in a separable probability space. We prove compactness of the conditional expectations with respect to L2-bounded random variables along sequences of sub-sigma-algebras. The varying index of measurability is captured by a bundle space construction. As a consequence, we establish the compactness of the space of sub-sigma-algebras. The proposed topology preserves independence and is compatible with join and meet operations. Finally, a new application to information economics is discussed.
Keywords:
convergence of sigma-algebras; compactness of sub-sigma-algebras; conditional expectation; fiber bundle; information economics;
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