Discussion Paper No. 169
November 8, 2021
Confidence and Career Choices: An Experiment
Author:
Abstract:
Confidence is often seen as the key to success. Empirical evidence about how such beliefs about one's abilities causally map into actions is, however, sparse. In this paper, we experimentally investigate the causal effect of an increase in confidence about one's own ability on two central choices made by workers in the labor market: choosing between jobs with different incentive schemes, and the subsequent choice of how much effort to exert within the job. An exogenous increase in confidence leads to an increase in subjects' propensity to choose payment schemes that depend heavily on ability. This is detrimental for low ability workers. Policy implications are discussed.
Keywords:
overconfidence; experiment; beliefs; real-effort; career choices;
JEL-Classification:
Download:
Discussion Paper No. 123
Beliefs as a Means of Self-Control? Evidence from a Dynamic Student Survey
Author:
Abstract:
We repeatedly elicit beliefs about the returns to study effort in a panel survey of students of a large university course. A behavioral model of quasi-hyperbolic discounting and malleable beliefs yields the prediction that the dynamics of return beliefs mirrors the importance of exerting self-control, such that return expectations first increase as the exam approaches, and then sharply drop post-exam. Exploiting variation in exam timing to control for common information shocks, we find this prediction confirmed: average subjective expectations of returns increase by about 20% over the period before the exam, and drop by about the same amount afterwards.
Keywords:
belief elicitation; return to study effort; dynamic belief patterns;
JEL-Classification:
Download:
Discussion Paper No. 118
November 5, 2021
Class Rank and Long-Run Outcomes
Author:
Abstract:
This paper considers a fundamental question about the school environment - what are the long run effects of a student's ordinal rank in elementary school? Using administrative data from all public school students in Texas, we show that students with a higher third grade academic rank, conditional on ability and classroom effects, have higher subsequent test scores, are more likely to take AP classes, graduate high school, enroll in college, and ultimately have higher earnings 19 years later. Given these findings, the paper concludes by exploring the tradeoff between higher quality schools and higher rank.
Keywords:
rank; education; subject choice;
JEL-Classification:
Download:
Discussion Paper No. 116
Who Teaches the Teachers? A RCT of Peer-to-Peer Observation and Feedback in 181 Schools
Author:
Abstract:
It is well established that teachers are the most important in-school factor in determining student outcomes. However, to date there is scant robust quantitative research demonstrating that teacher training programs can have lasting impacts on student test scores. To address this gap, we conduct and evaluate a teacher peer-to-peer observation and feedback program under Randomized Control Trial (RCT) conditions. Half of 181 volunteer primary schools in England were randomly selected to participate in the two year program. We find that students of treated teachers perform no better on national tests a year after the program ended. The absence of external observers and incentives in our program may explain the contrast of these results with the small body of work which shows a positive influence of teacher observation and feedback on pupil outcomes.
Keywords:
education; teachers; ret; peer mentoring;
JEL-Classification:
Download:
Discussion Paper No. 101
Labor Market and Distributional Effects of an Increase in the Retirement Age
Author:
Abstract:
We evaluate the labor market and distributional effects of an increase in the early retirement age (ERA) from 60 to 63 for women. We use a regression discontinuity design which exploits the immediate increase in the ERA between women born in 1951 and 1952. The analysis is based on the German micro census which includes about 370,000 households per year. We focus on heterogeneous labor market effects on the individual and on the household level and we study the distributional implications using net household income. In this respect we extend the previous literature which mainly studied employment effects on the individual level. Our results show sizable labor market effects which strongly differ by subgroups. We document larger employment effects for women who cannot rely on other income on the household level, e.g. women with a low income partner. The distributional analysis shows on average no significant effects on female or household income. This result holds as well for heterogeneous groups: Even for the most vulnerable groups, such as single women, women without higher education, or low partner income, we do not find significant reductions in income. One reason for this result is program substitution.
Keywords:
retirement age; pension reform; labor supply; early retirement; distributional effects; spillover effects; household;
JEL-Classification:
Download:
Discussion Paper No. 89
November 4, 2021
Welfare-Base Altruism
Author:
Abstract:
Why do people give when asked, but prefer not to be asked, and even take when possible? We show that standard behavioral axioms including separability, narrow bracketing, and scaling invariance predict these seemingly inconsistent observations. Specifically, these axioms imply that interdependence of preferences ("altruism") results from concerns for the welfare of others, as opposed to their mere payoffs, where individual welfares are captured by the reference-dependent value functions known from prospect theory. The resulting preferences are non-convex, which captures giving, sorting, and taking directly. Re-analyzing choices of 981 subjects in 83 treatments covering many variants of dictator games, we find that individual reference points are distributed consistently across studies, allowing us to classify subjects as either non-givers, altruistic givers, or social pressure givers and use welfare-based altruism to reliably predict giving, sorting, and taking across experiments.
Keywords:
social preferences; axiomatic foundation; robustness; giving; charitable donations;
JEL-Classification:
Download:
Discussion Paper No. 78
The Axiomatic Foundation of Logit
Author:
Abstract:
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;
JEL-Classification:
Download:
Discussion Paper No. 77
Specification Testing in Random Coefficient Models
Author:
Abstract:
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;
JEL-Classification:
Download:
Discussion Paper No. 73
An Experiment on Social Mislearning
Author:
Abstract:
We investigate experimentally whether social learners appreciate the redundancy of information conveyed by their observed predecessors' actions. Each participant observes a private signal and enters an estimate of the sum of all earlier-moving participants' signals plus her own. In a first treatment, participants move single-file and observe all predecessors' entries; Bayesian Nash Equilibrium (BNE) predicts that each participant simply add her signal to her immediate predecessor's entry. Although 75% of participants do so, redundancy neglect by the other 25% generates excess imitation and mild inefficiencies. In a second treatment, participants move four per period; BNE predicts that most players anti-imitate some observed entries. Such anti-imitation occurs in 35% of the most transparent cases, and 16% overall. The remaining redundancy neglect creates dramatic excess imitation and inefficiencies: late-period entries are far too extreme, and on average participants would earn substantially more by ignoring their predecessors altogether.
Keywords:
social learning; redundancy neglect; experiments; higher-order beliefs;
JEL-Classification:
Download:
Discussion Paper No. 66
Learning From Unrealized versus Realized Prices
Author:
Abstract:
Our experiments investigate the extent to which traders learn from the price, differentiating between situations where orders are submitted before versus after the price has realized. In simultaneous markets with bids that are conditional on the price, traders neglect the information conveyed by the hypothetical value of the price. In sequential markets where the price is known prior to the bid submission, traders react to price to an extent that is roughly consistent with the benchmark theory. The difference's robustness to a number of variations provides insights about the drivers of this effect.
Keywords:
JEL-Classification: