Discussion Paper No. 468
November 30, 2023
The Effect of Incentives in Non-Routine Analytical Team Tasks
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Abstract:
Despite the prevalence of non-routine analytical team tasks in modern economies, little is understood regarding how incentives influence performance in these tasks. In a series of field experiments involving more than 5,000 participants, we investigate how incentives alter behavior in teams working on such a task. We document a positive effect of bonus incentives on performance, even among teams with strong intrinsic motivation. Bonuses also transform team organization by enhancing the demand for leadership. Exogenously increasing teams' demand for leadership results in performance improvements comparable to those seen with bonus incentives, rendering it as a likely mediator of incentive effects.
Keywords:
team work; bonus; incentives; leadership; non-routine; exploration;
JEL-Classification:
C92; C93; J33; D03; M52;
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Discussion Paper No. 467
November 29, 2023
Robotizing to Compete? Firm-level Evidence
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Abstract:
We investigate the impact of product market competition on firms’ automation investments. We use a rich combination of micro-data on Portuguese exporters and exploit a novel source of variation in the degree of competition they face – a tariff liberalization between the European Union and Central and Eastern European countries in the 1990s. We find that firms facing greater competition in export markets tend to reduce investments in automation technologies. These average negative effects are driven by the least productive firms, while the most efficient exporters in industries that are more prone to automation tend to robotize in order to compete. These findings suggest that an increase in the degree of product market competition widens disparities between firms.
Keywords:
automation; product market competition; firm heterogeneity; trade liberalization; workers; multi-product firms;
JEL-Classification:
D22; F16; J23; L25; O33;
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Discussion Paper No. 466
Commitment Requests Do Not Affect Truth-Telling in Laboratory and Online Experiments
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Using a standard cheating game, we investigate whether the request to sign a no-cheating declaration affects truth-telling. Our design varies the content of a no-cheating declaration (reference to ethical behavior vs. reference to possible sanctions) and the type of experiment (online vs. offline). Irrespective of the declaration's content, commitment requests do not affect truth-telling, neither in the laboratory nor online. The inefficacy of commitment requests appears robust across different samples and does not depend on psychological measures of reactance.
Keywords:
cheating; lying; truth-telling; compliance; commitment; no-cheating rule; no-cheating declaration; commitment request;
JEL-Classification:
C91; C93; D03;
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Discussion Paper No. 465
Fickle Fossils. Economic Growth, Coal and the European Oil Invasion, 1900-2015
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Fossil fuels have shaped the European economy since the industrial revolution. We use new long-run panel data to analyse the effect of both, coal and oil on economic growth between 1900 and 2015, exploiting variation at the level of European NUTS2 and NUTS3 regions. We show that the reversal of fortune of coal regions resulted from the second energy transition. Specifically, an “oil invasion” in the early 1960s turned regional coal abundance from a blessing into a curse. Human capital accumulation contributed to this reversal of fortune and fully explains the negative effects until today. Moreover, we find substantial heterogeneity between former coal regions that is in line with Glaeser’s “reinvention hypothesis”: regions with a higher skill-level adjusted much better to the decline of coal. In particular, we show that coal regions with a higher urban density before 1800 were much more resilient than others.
Keywords:
coal; oil invasion; second energy transition; education; reinvention; growth;
JEL-Classification:
O13; O44; Q32; N14; R10; I25;
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Discussion Paper No. 464
November 27, 2023
Comparing Crowdfunding Mechanisms: Introducing the Generalized Moulin-Shenker Mechanism
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For reward-based crowdfunding, we introduce the strategy-proof Generalized Moulin-Shenker mechanism (GMS) and compare its performance to the prevailing All-Or-Nothing mechanism (AON). Theoretically, GMS outperforms AON in equilibrium profit and funding success. We test these predictions experimentally, distinguishing between a sealed-bid and a dynamic version of GMS. We find that the dynamic GMS outperforms the sealed-bid GMS. It performs better than AON when the producer aims at maximizing funding success. For crowdfunding in practice, this suggests that the current standard of financing projects may be improved upon by implementing a crowdfunding mechanism that is similar to the dynamic GMS.
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JEL-Classification:
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Discussion Paper No. 463
November 24, 2023
Robust Decision-Making under Risk and Ambiguity
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Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model’s implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision problem to misspecification, and ultimately leads to post-decision disappointment. Using statistical decision theory, we develop a framework to explore, evaluate, and optimize robust decision rules that explicitly account for estimation uncertainty. We show how to operationalize our analysis by studying robust decisions in a stochastic dynamic investment model in which a decision-maker directly accounts for uncertainty in the model’s transition dynamics.
Keywords:
decision-making under uncertainty; robust Markov decision process;
JEL-Classification:
D81; C44; D25;
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Discussion Paper No. 462
Industrialization, Returns, Inequality
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How does revolutionary technological change impact wealth inequality? We turn to the mother of all technological shocks–the Industrial Revolution–and analyze its role for wealth concentration both empirically and theoretically. Based on a novel dataset on wealth shares at the level of Prussian counties, we provide causal evidence on the positive effect of industrialization on the top percentile's wealth share and the inequality among top fortunes. We show that this relationship between industrialization, wealth concentration, and tail fattening is consistent with both cross-country data on national wealth distributions and with a new individual-level dataset of Prussian millionaires. We disentangle the mechanisms underlying the observed wealth concentration and tail fattening by introducing a dynamic two-sector structure into an overlapping generations model with heterogeneous returns to capital. In particular, we study the role of sector-specific scale dependence, i.e. the positive correlation of rates of return and wealth in industry, and dynastic type dependence in returns, i.e., the gradual one-directional transition of wealth-holders from the low-return traditional to the high-return industrial sector. The simulations suggest that the combination of these two features explains about half of the total increase of the top-1% share, while the other half resulted from the general increase and higher dispersion of returns induced by the emerging industrial sector.
Keywords:
rates of return; wealth inequality; industrialization; technology; simulation;
JEL-Classification:
D31; E21; N13; O14;
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Discussion Paper No. 461
Loss Aversion
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Loss aversion postulates that people prefer avoiding losses over acquiring gains of equal size. It is a central part of prospect theory and, according to Daniel Kahneman, “the most significant contribution of psychology to behavioral economics” (Kahneman, 2011, p. 300). It has powerful implications for decision theory and has been fruitfully applied in many subfields of economics. However, because the reference point is often not well defined and loss aversion interacts with other behavioral biases, there is some controversy about the concept.
Keywords:
loss aversion; reference point; prospect theory; endowment effect; decision theory; risk;
JEL-Classification:
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Discussion Paper No. 460
November 21, 2023
Cournot Meets Bayes-Nash: A Discontinuity in Behavior in Finitely Repeated Duopoly Games
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We conduct a series of Cournot duopoly market experiments with a high number of repetitions and fixed matching. Our treatments include markets with (a) complete cost symmetry and complete information, (b) slight cost asymmetry and complete information, and (c) varying cost asymmetries and incomplete information. For the case of complete cost symmetry and complete information, our data confirm the well-known result that duopoly players achieve, on average, partial collusion. However, as soon as any level of cost asymmetry or incomplete information is introduced, observed average individual quantities are remarkably close to the static Bayes-Nash equilibrium predictions.
Keywords:
Cournot; Bayesian game; Bayes-Nash equilibrium; repeated games; collusion; cooperation; experimental economics;
JEL-Classification:
D43; L13; C72; C92;
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Discussion Paper No. 459
Revisiting the Trade-Creating Effects of Non-Tariff Barriers
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Modern regional trade agreements focus on promoting bilateral exchange mostly by lowering non-tariff barriers to trade. But do existing regional trade agreements actually deliver what they promise? This paper argues that existing results in the literature are upward biased because of measurement error in a crucial control variable: tariff rates. Using a novel data set of high-quality tariff information, the paper shows that, on average, non-tariff barriers reductions in deep regional trade agreements boost services trade but not goods trade. Estimating separate non-tariff barrier effects for each regional trade agreement reveals strong heterogeneity: only 23 percent of all regional trade agreements seem to lower non-tariff barriers. For most regional trade agreements, we fail to find any significant effect, while 9 percent appear to reduce trade, possibly because a more balanced regulation evens out comparative advantages. The trade agreements that foster trade the most include non-discriminatory trade policy changes.
Keywords:
RTAs; non-tariff barriers; trade policy; tariffs;
JEL-Classification:
F13; F14;